Road map for convergence, says industry

Written by fe Bureau | Chennai | Updated: Aug 30 2011, 06:11am hrs
Overall, on first reading, the Reserve Bank of India (RBI) working panel report on NBFCs released on Monday, seems positive for the NBFC sector. The recognition of the role played by the NBFC sector in last mile credit delivery is very heartening and is a significant endorsement by the regulator of the role played by NBFCs in the much-talked-about financial inclusion. Commenting on a Reserve Bank's working panel report on NBFCs done by former RBI deputy governor Usha Thorat, TT Srinivasaraghavan, managing director, Sundaram Finance, said besides prescribing threshold limits, the working group report suggested that NBFCs should be subjected to the same regulations as banks with regard to provisioning norms and lending to stock brokers and merchant bankers. "For us, two things clearly stand out. One, the tax treatment in respect of income tax deduction for provisions made under the regulations is something the industry has been asking for, for the last 15 years. Secondly, the benefit that is likely to accrue to NBFCs under the SARFAESI Act is also a positive step for the NBFCs. We believe that the message that the regulator is looking to send out through this report is to have a greater convergence between the regulation of banks and non banks. There seems to be a road map for this convergence and we believe that this will happen over a period of time."

On the other side, he said that one long standing plea of the NBFCs that has not been addressed in this report is our request for differential risk weights for different classes of assets financed by NBFCs.