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`NBFCs to number less than 1000'

Our Bureau

CHENNAI, Sept 13

THE RBI is close to finalising the list of registered NBFCs and the list of companies whose registration is approved should be out in a couple of months, according to Mr. R. Sadanandan, Chief General Manager in charge of non-banking finance companies (NB FCs), Reserve Bank of India.

``There will not be 40,000 NBFCs like before. It will be a less than four figures,'' he said here on Wednesday. He was speaking at a meeting organised here by the Equipment Leasing Association (India) -- ELAI. Mr. Sadanandan said 671 companies had been r egistered till date.

He said the RBI would keep a watch on companies whose applications for registration had been rejected and companies which had not applied for registration at all.

Noting that deposits had started looking up, he said NBFCs had a bright future ahead of them. NBFCs were now being allowed to enter other areas including insurance and credit cards -- while three companies had been given the green signal to enter insuran ce business, one had received the nod for credit card business.

He said the recommendations of the Sabanayakam Committee for regulation of nidhi companies would be out in a month. The RBI had suggested that nidhi companies should also be regulated on the same lines as NBFCs, he said.

The RBI had taken several steps for the regulation of NBFCs in the last three years, including restrictions on opening and closing branches, acceptance of deposits from the public and compulsory internal audits. He called for a self regulating mechanism for the NBFCs.

He cautioned the NBFCs on asset-liability mismatches. Further, interest rates on deposits should be in line with the market rates and there should be proper credit appraisal before sanctioning loans.

Most NBFCs had got into problems because they had pumped loans into borrowers hands, as they (NBFCs) happened to be flush with funds.

Earlier, the Chairman of the ELAI, Mr. P.S. Balasubramanian, said the industry was in ``urgent'' need of a debt recovery tribunal, besides permission to count ``provision for bad debts'' as expenditure for income-tax purposes.

Later, at the annual general meeting of ELAI, the President, India Cements Capital and Finance Ltd, Mr V. A. George, was elected Chairman of the Association. In his acceptance speech he said NBFCs had a future because the industry had evolved out of an e conomic need rather than by any statute. He said the industry would ``emerge stronger'' from the turmoil.

The Managing Director, Sundaram Finance Ltd, Mr G. K. Raman, said the NBFC industry was awaiting the recommendation of the Institute of Chartered Accountants of India on whether depreciation benefits should be allowed for lessor or lessee companies.

He said in the UK, for example, the lessor was allowed to claim depreciation benefit for income-tax purposes. If the Institute recommended that only the lessee could claim depreciation benefit, then ``finance lease, as a product, will die,'' he said.