Assocham opposes new classification norms for NBFC NPAs

“NBFCs should be allowed to deploy surplus liquidity in government securities, treasury bills and money market with maturity beyond 30 days. For computing total financial assets, cash and bank deposits, such instruments may be deducted and treated as part of financial assets,” said Assocham secretary general DS Rawat

Bangalore: The Associated Chambers of Commerce and Industry of India (Assocham) has opposed the Reserve Bank of India’s (RBI) proposed new classification of the secured and unsecured advances of non-banking financial companies (NBFCs) as non-performing assets (NPAs) if the overdue period exceeds 90 days, reports PTI.

Under the existing norms, an unsecured asset overdue beyond 90 days and a secured asset overdue beyond 180 days are treated as NPAs.

“NBFCs are a major source of funding for unorganised sector of the economy. The revised classification will eventually increase capital requirements of NBFCs and their cost of lending,” said Assocham in response to the draft recommendations of a RBI working group.

It also suggested an enhanced time frame of five years to achieve the proposed Tier-I capital to risk weighted assets (CRAR) ratio of 12%, instead of three years as proposed by the working group.

“NBFCs should be allowed to deploy surplus liquidity in government securities, treasury bills and money market with maturity beyond 30 days. For computing total financial assets, cash and bank deposits, such instruments may be deducted and treated as part of financial assets,” said Assocham secretary general DS Rawat.

On regulating loans to stock brokers and merchant bankers, it suggested that status quo may be maintained as the present restriction of capital market exposure of 10% of net worth by banks will restrict the ability of NBFCs to lend to this sector.
To increase CRAR from 100% to 150% for capital market exposure and 125% on real estate exposure, the chamber said this will increase the cost of borrowing for NBFCs and also be a deterrent for banks to lend to NBFCs.

Borrowing through external commercial borrowings (ECB) route or NBFC is currently prohibited. It should be allowed so that NBFCs have a window to raise funds at substantially low rate of interests.

Any further tightening may create systemic risk for the sector. Mr Rawat said no asset size ceiling should be insisted if the NBFCs are not accessing public funds for registration with the RBI.

Inter-corporate deposits may be excluded from the definition of public funds where the lending company has not received any public funds and both the lending as well as borrowing company belong to the same group.

As the term business has not been defined, companies which are holding long-term investments in shares of group companies (and thus are merely investment companies) may not be considered as carrying on the business of NBFCs.

To tackle the problem of bad assets and asset recovery, the RBI working group has proposed that NBFCs should be brought under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act.

The chamber said it is a bold step and NBFCs should be able to access the service of Debt Recovery Tribunals as well.

Existing non-deposit taking NBFCs having a net worth above Rs500 crore and desirous of converting to NBFCs-D should be allowed to do so automatically with intimation to the RBI.

Also, assessing officers may be directed to issue nil tax deducted at source (TDS) certificates wherever the customer base exceeds 1,000 subject to the condition that the assessed pays an advance amount equal to the average of its tax paid in last three years.

NBFCs account for nearly 12% per cent of advances of the total financial system and can play a major role in furthering financial inclusion. There are 12,630 NBFCs registered with the RBI providing credit delivery in asset financing and hire purchase. In 2010-11 they delivered credit to the tune of Rs4.62 lakh crore.

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No need to fast-track recapitalisation of SBI: Finance ministry official

A senior finance ministry said SBI is not planning to raise any overseas debt immediately and so the government is not much worried about the ratings downgrade

New Delhi: Downplaying Moody’s decision to downgrade rating of State Bank of India (SBI), a senior finance ministry official said the government will not fast-track recapitalisation of the PSU bank, reports PTI.

“There is no need to panic. We are working on it (recapitalisation). The process will not be fast-tracked because of Moody’s downgrade,” the official told PTI.

SBI had submitted the proposal a couple of months back to raise Rs20,000 crore through the rights issue. The bank requires funding to implement its growth plans over the next two fiscals.

The government is the largest shareholder of the bank, with 59% equity. It will have to shell out a big amount during the rights issue to maintain its equity holding.

The official said SBI is not planning to raise any overseas debt immediately and so the government is not much worried about the ratings downgrade.

“Why should we be bothered (by the ratings downgrade)? We are not going to raise any such debt now,” he said, adding that “the government is on course to recapitalise the state-run lender, but it will not act in haste to increase the capital”.

Last week, global credit ratings firm Moody’s downgraded SBI’s financial strength by one notch to ‘D+’ from ‘C-’ on account of its low Tier-I (equity) capital ratio and deteriorating asset quality. The downgrading is likely to make overseas borrowings costlier for the state-owned lender.

The rating applies to perpetual debt, which is called IPDR, and qualifies for Tier I capital.

The bank has so far issued $625 million of such debt in two tranches—$400 million and $225 million. Both these debts are due for call option in 2017.

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CBI looks into spectrum to telecom companies in DTH business

The decision to probe the DTH broadcasters was taken after agency sleuths found that some of the telecom companies, under probe in the 2G scam, were also broadcasters of the service

New Delhi: Widening its probe in the second generation (2G) scam, the Central Bureau of Investigation (CBI) has now turned to investigate spectrum allocation made to direct-to-home (DTH) broadcasters by seeking details of sanction of bandwidth, reports PTI.

The decision to probe the DTH broadcasters was taken after agency sleuths found that some of the telecom companies, under probe in the 2G scam, were also broadcasters of the service, official sources said Sunday.

The CBI had sought details including the original files containing applications for assigning of spectrum and wireless operating licence for DTH services.

The files pertained to Dish TV India, Reliance Big TV Pvt Ltd, Bharti Multi-media, Bharti Business Channel Pvt Ltd, Doordarshan, SunDirect TV Pvt Ltd and Tata Sky.

CBI sources said it would examine the files as some of these companies were under probe in the 2G scam which included role of former telecom minister Dayanidhi Maran in Aircel-Maxis deal.

The CBI is also looking into a possible kickback received by a south India-based TV channel.

In its charge-sheet, the CBI has alleged that DMK MP Kanimozhi, daughter of former Tamil Nadu chief minister M Karunanidhi, had got Kalaignar TV in the Tata Sky bouquet in conspiracy with party colleague and former telecom minister A Raja.

Reliance Telecommunications has already been charged with criminal conspiracy and cheating in the 2G case. Bharti and Tatas, which are in both DTH and telecom fields, have not been made accused in the 2G scam. Dish TV and Doordarshan are not into telecom business.

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