It seems the domestic non-banking finance players are getting ready to face the new situation emerging out of the proposed policy changes by the Reserve Bank of India (RBI) by which they wouldn?t be able to accept public deposits and have sought alternatives to meet their funding requirements.

Reserve Bank of India (RBI) deputy governor, V Leeladhar,said ?A time has perhaps come when we can now think of only allowing banks to acquire public deposits. The number of deposit-taking NBFCs is sharply declining as also the amount of deposits with them.?

He further explained that the change in RBI?s stance would involve a policy action, and there would be a transition period…a time has come to take a fresh look on the issue).

The number of deposit-taking non-banking financial companies has fallen to 376 at March 2008 from 710 in June 2003. Public deposits held by deposit taking NBFCs have more than halved to Rs 2043 crore as on March 2007 as against Rs 5035 crore on in March 2003, he said.

Reacting to the proposed changes by the RBI , V. Ravi, chief financial officer, Mahindra & Mahindra Financial Services, said that smaller NBFCs who are focused on raising funds through deposits maybe impacted. However, large NBFCs may not feel the heat, he added. ?Today, we are not very active in acquiring public deposits. We feel that the transaction cost, posting, employee and other related costs are very high in acquiring deposits,? said Ravi.

However, if RBI comes up with this clause of allowing only banks to receive public deposits, NBFCs may plead with the RBI to create a condusive atmosphere where banks and other financial institutions need to be more liberal towards NBFCs.

?The other alternative is that there should be direct re-finance institutions. NBFCs may place these two options in front of the regulator,? Ravi added.

Ravi pointed out that as public fixed deposits placed with NBFCs are unsecured unlike with those placed with government banks, people try to opt for the latter.

Mahesh Thakkar, director general of Finance Industry Development Council said that many NBFCs are opting out of the deposit taking route.