The PMEAC chairman also said that as new banks take at least two decades to achieve scale, the decision to allow new entrants must depend on what the economy needs over the next several decades
RBI is probably investigating all the legal avenues that can give it adequate powers to directly intervene in the newly licensed banks in case they act out of norms and guidelines
Industry bodies have also urged RBI to revisit its guidelines on securitisation and priority sector lending as industry players, especially NBFCs, are facing fund crunch, apart from raising the cap on NBFCs' exposure to mutual funds
Mumbai: Non-banking finance companies (NBFCs) and asset infra finance companies have asked the Reserve Bank of India (RBI) to further liberalise foreign borrowing norms for them to tide over fund crunch, reports PTI.
Financial market players like NBFCs, the Finance Industry Development Council (FIDC), the Fixed Income Money Market and Derivatives Association (Fimmda), Foreign Exchange Dealers' Association (FEDAI), the Primary Dealers Association, among others, met the RBI top brass, including Governor D Subbarao, this evening at the customary pre-policy meeting.
"We requested the Governor to look at relaxing the external commercial borrowings (ECB) norms for NBFCs and asset financing companies," FIDC Director General Mahesh Thakkar told reporters after the meeting.
He said that the industry bodies have also urged RBI to revisit the guidelines on securitisation and priority sector lending as industry players, especially NBFCs, are facing fund crunch, apart from raising the cap on NBFCs' exposure to mutual funds.
Leading NBFC L&T Finance president N Shivraman said while conveying the industry's concerns about fund crunch, as banks have not passed on the benefit of the rate cuts by RBI in April to borrowers, they urged the central bank to relax the ECB norms for them.
"The RBI needs to help us to diversify our funding sources," Shivraman said.
The draft report of the Usha Thorat committee on NBFCs, submitted in August 2011, had called for tighter rules for NBFCs in terms of provisioning, lending and capital adequacy ratios, to help avert possible risks to the financial system.
The RBI set up the committee because unlike banks, whose exposure to realty and stock markets are tightly regulated, NBFCs don't have stringent rules on sectoral lending and group-wise exposure, enabling them to lend more liberally against shares and also for realty.
The industry, however, argued today that it was facing considerable fund crunch and sought liberalised borrowing norms to raise funds from overseas.