Peerless Battles For Residuary Status

Kolkata, Aug 30 | Updated: Aug 31 2004, 05:38am hrs
Peerless General Finance & Investment has urged the Reserve Bank of India not to go ahead with a proposal to do away with the RNBC category.

Chairman Dhruba Narayan Ghosh has noted that a working group set up by the RBI to study the role of RNBCs has suggested that they convert themselves into one of the definable categories of non-banking finance companies (NBFCs).

The working group has floated a discussion paper outlining its recommendations.

In response, Peerless has submitted its comments "disagreeing with the approach of the Working Group," Dr Ghosh has noted in his report to shareholders.

Dr Ghosh a former chairman of State Bank of India who has steered Kolkata-based Peerless out of the woods gradually over the past eight years, has noted that "these recommendations, if implemented, are likely to jeopardise the operations of RNBCs."

On June 22 this year, the RBI notified new restrictions on the investment pattern of RNBCs. The RBI wants the RNBCs to phase out comletely their discretionary investment limit of 20 per cent of deposit liability by March 2006.

The RNBCs got their quirky status decades ago, when bureaucrats given the task of bringing order in Indias financial world could not figure out how to classify these outfits.

According to Dr Ghosh, "With interest on fixed income yielding investments from approved categories having declined steeply over the years, and with a committed rate of return to the Certificate-holders, the pressure on margin is acute."

"As such, any regulation forbidding discretionary investments, including capital market exposure is punitive in nature and can hardly be considered to be rational," Dr Ghosh has noted.