RBI has nixed a proposal to create a separate category of NBFCs consistently financing priority sectors such as infrastructure, SMEs and agriculture, despite the finance ministry?s support for such a suggestion.
Creation of a separate category status was sought by NBFCs so that those among them with an asset or income exposure of more than 60% to priority sectors could get easier access to fund raising.
Currently, there is no priority sector status for lending to NBFCs. This, according to NBFCs, is leading to higher cost of funds for them.
The constraints faced by NBFCs ? especially those in the asset and infrastructure finance sectors ? in fund raising include lack of access to external commercial borrowing and refinance window.
RBI said it has so far categorised NBFCs on the basis of their nature of assets and not on target customers, finance ministry sources confirmed. The regulator has expressed doubts regarding the end-use of funds (that is whether the benefit will go to priority sectors) in case such a categorisation is allowed, they said.
Pointing out that RBI had given priority-sector lending status to micro-finance institutions, sources say a similar status for NBFCs dealing with priority sectors could help sectors such as infrastructure, which is a major focus for the government.
Currently, RBI acknowledges the following categories of NBFCs: Asset finance company, investment company, loan company, infrastructure finance company, core investment company, infrastructure debt fund-NBFC and NBFC-micro finance institution.
?Outreach of credit is still very difficult and getting a loan is not easy. Unless we have more institutions giving credit to these important sectors, the situation is not going to improve and RBI has to understand it,? an official said, calling demand of the NBFC sector a ?reasonable? one.
The demand was raised by the industry in a meeting with finance minister P Chidambaram, senior officials of the financial services department and RBI on February 9.