Friday, May 14

NBFCs with Rs 1,000 crore assets want public deposit access

Mumbai: Non-banking finance companies (NBFCs) with assets exceeding Rs 1,000 crore want the central bank to allow them to accept public deposits, underscoring their systemic importance in providing credit to geographies – and customers – traditional banks still can’t reach. In their previous two meetings with the central bank, NBFCs have sought this facility to help segregate the few entities that are considered systemically important from the many that are not.

“Industry leaders have been making this demand with the regulator to allow the access of public deposit for large NBFCs that have been in operation for a long time and have proven track records,” said Raman Agarwal, chairman, Finance Industry Development Council (FIDC). “We are also working on a product which is a secured bond or debenture and can be issued on-tap.”

There are more than 10,000 NBFCs and around 100 are allowed to accept public deposits. NBFCs with assets of at least Rs 500 crore are considered systemically important.

For large NBFCs, the industry is seeking a separate classification. Sector leaders want ‘systemically large’ NBFCs treated differently than the 10,000 others that make up the sector.

“The asset size of systemically important NBFCs could be raised to Rs 5,000 crore and they can be given the licence to accept public deposits to diversify funding sources,” said R Sridhar, CEO, IndoStar Capital.

The central bank has discouraged the acceptance of deposits by NBFCs, preferring banks for offering that service. Hence, no new licence has been given for depositaccepting NBFCs after 1997. NBFCs that do not accept deposits are also further divided into two categories – Systemically Important Non-deposit Taking NBFCs and other Non-deposit taking NBFCs (NBFCs-ND) based on asset size.

Only rated NBFCs-Deposit (taking) can accept public deposits.

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