Money & Banking
Tata Capital says new norms to eat into bottom lines of NBFCs

The new changes for NBFCs proposed by the RBI would negatively impact profits and raise lending rates, feels Tata Capital

Mumbai: Tata Group's finance subsidiary Tata Capital has expressed reservations about the Reserve Bank of India (RBI)'s proposed changes in the norms governing non banking financial companies (NBFCs), saying the move will negatively impact profits and raise lending rates, reports PTI.


“Overall, in the short-run it will impact NBFCs’ profitability and our ability to lend,” Tata Capital Chief Financial Officer Govind Sankaranarayanan told PTI. He, however, added that the new norms are good in the long-term.


The draft norms, based on the recommendations by the Usha Thorat (Former RBI deputy governor) Committee and released last month, seek to bring NBFCs at par with commercial banks.


Stating that banks operate with benefits like recovering money under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (Sarfesi Act) and having access to low-cost deposits, he said, “Only on the disadvantages side you are going to bring it (banks and NBFCs) at par, and thus it becomes difficult.”


“Conceptually, one cannot object to the idea of an NBFC and a bank being similar. But the playing field needs to be uniformly levelled,” Sankaranarayanan said.


Among other recommendations, the RBI wants to cut the time period for classification of an NBFC’s account into an NPA in 90 days from the present 180 days, higher capital adequacy and also a phased jump in the provisioning for standard assets to 0.40% from the present 0.25%.


“All these increase your cost, so if your cost jumps, you will have to pass them over to your customers... to some extent, lending costs will go up by a bit and to some extent you will not lend to some people,” the Tata Capital official pointed out.


He further stated that the weaker than the best rated borrowers residing in small towns, availing money for commercial vehicles and farm equipments and small businesses—traditional businesses for NBFCs—will suffer in this case.


Sankaranarayanan said even after the gloomy news on the economic front, Tata Capital will meet its targeted credit growth of up to 30% this fiscal as the company is on an expansion mode.


NRI deposits nearly double to $11.24 billion in April-November period

Even though the Indian rupee has appreciated from its all-time low, inflows into NRI deposits continue on the back of higher interest rates

Mumbai: Continuing rupee fall and higher interest rate have seen deposits by non-resident Indians (NRIs) nearly doubling in the first eight months of 2012-13 to $11.24 billion from $6.39 billion a year ago, reports PTI quoting data from the Reserve Bank of India (RBI).


However, the non-resident (ordinary) rupee accounts and foreign currency non-resident accounts saw an outflow this year as against an inflow last year, according to the central bank data.


It can be noted that the rupee had hit an all-time low of 57.32 to the dollar on 14th June. However, last Friday, the rupee ended at 54.76 to the dollar, which is 4.67% stronger from its all-time low.


Even though the currency has appreciated from its all-time low, inflows into NRI deposits continue on the back of higher interest rates.


It can be noted that following the rupee fall in December 2011, the RBI had deregulated interest rates on NRI deposits, forcing banks to hike rates of such deposits sharply, which now hover over 10%, while banks were lowering rates for domestic deposits.


Following the steep fall in the rupee, which began with the downgrade of the US rating by S&P in August 2011, in November, the RBI had raised maximum interest rates on NRE accounts for one-year-plus to Libor plus 275 basis points (bps).


This deregulation resulted in a surge in inflows in the January-May period of 2012. But, inflows started ebbing out and November 2012 saw the lowest inflow in nine months.


The RBI again hiked the cap on interest rates for Foreign Currency Non Residential (FCNR) account, raising it to 200 bps above the Libor for one-three-year deposits and 300 bps for deposits in the three-five year bucket.


Allow registration of FIR as a matter of right

Time is ripe now to unleash equivalent of RTI in policing; to make FIR registration a matter of right. The police should have no discretion to refuse FIR registration. In fact, a recorded FIR helps make people as accountable as the police simply because a record exists

Public silence and tolerance limits just got breached. The last straw was the Delhi gang-rape but the scourge on the society was always there and is continuing still. And continuing also is the debate on laws, policing, men, women, society, change and more. Amongst the deafening cacophony, screeching anchors and plethora of opinions from almost everyone, it seems justice JS Verma’s quest for suggestions has very quickly become from elusive answers to one of information overload, with no shortage of views. My case is simple—do first things first, build a rock-solid foundation and rest will follow. And, best things often are simple too. That the suggestion made herein is the generic covering all criminal/civil cases; it strengthens the case even more.


The suggested first step in restoring the faith of people in criminal justice system is to make FIR (first information report) registration free for all citizens.


Rahul Gandhi asked for concrete suggestions to end violence against women and if he has the powers many attribute to him and prompting him to seek suggestions to change the status quo, he could start with a game-changer like this. And what we are asking for is just a full, fair and free implementation of the existing law on FIR registration in letter and spirit, freeing it up from discretion, something that should be so in the first place. Right to FIR.


The most forceful public voice on police reforms, Kiran Bedi, placed the issue on top of the agenda in the aftermath of the heinous crime and we explore the what, how and why it is uppermost in priority, how it can be done and what stops.


Why free FIR first?


The criminal justice system in India starts from and rests on lodging of a complaint by a victim (or even others for that matter) of a crime, with the police. As we all possibly learnt in secondary school civics, FIR is the first step in sharing information with the police, triggering actions by the police, law and administrative machinery of the state. We all assume it to be what it literally means—it is first, it is information and it is a formally recorded report. It is not a charge-sheet, it is not even an allegation. It is just information that may lead to further steps based on investigation. But anyone who has ever attempted to lodge an FIR knows how that is easier said than done. Yes, law permits even a third party, for example, a witness to lodge the report but we all know even victims are either scared of entering a police station or denied FIR registration, what to say of third parties.


A colleague in a metropolitan city was mercilessly assaulted and thrown out of the house at midnight by her husband. After some frantic calls to relatives and unable to cool tempers, she was advised to lodge a police complaint. Luckily the police station was nearby but she did not feel safe to go alone at the late hour and waited for her relatives to come. Later, the police constable on duty heard her but refused to make any case, instead, seeking to meet the husband. Then another round of meetings with the SHO followed. To cut the long story short—over next few days, after multiple trips by the woman and her relatives and the husband playing truant, the police started convincing the woman to make up to the husband, refused to lodge complaint and even brokered peace between both and asked husband to take the wife back. No FIR, no complaint was registered.


A month later, an action replay happened. Again the police refused to register any complaint. After few weeks, through a lawyer and intervention of courts, under Section 156 (3) of the CrPC, an FIR was filed. The colleague shared that the police did not cooperate even then and merely said they would file what they wish to in the court, where they diluted her case on possible receipt of bribes. By the time the FIR was filed only two months after second assault on her, all chance of police action and gathering evidence was lost.


This is no isolated case. Only cases involving serious crimes like murder or rape, or those involving the powerful elite or on orders from higher authorities, or on orders of the court, get registered. A last category of FIRs getting registered is often through bribes. The problem in this sequence of events that plays out with minor variations in any criminal case, big or small is that lodging a FIR is not free. The whole process is to discourage registration of crime. This leads to police being deprived of crime intelligence as also the victim being deprived of right to complain. And worse, it emboldens the culprits. Moreover, any discretion, as with the police on the subject, is source of extra power and prone to misuse. Thirdly, anything unrecorded in the police registers is as good as not having happened. Fourthly, why does the police fail to register a FIR in the first place and has to be told by courts? Any case admitted and sent to the police for registering a FIR under Section 156 (3) should be taken as a corrective advice from the judiciary to the police to prevent similar errors in future but it is not even perceived that way by the police and taken as a norm.


Why I also push for FIR registration above many other reforms is because they would be supported by it. And many reforms would give a fake picture if the base is still weak in form of unreliable crime records due to lack of FIR registration.


What is the big deal in free FIR first?


“Our crime record on rape is high because registration has gone up,” we all heard the joint commissioner of police say in defence of Delhi’s crime record. Conversely, a state like Uttar Pradesh, despite being low on women safety and law and order, also gets away by showing its low official crime rate. The point is, the entire crime record data is either worth using or we should not even spend in recording/documenting it. If registration is low then also the police should be accountable and if crime is high, then too. Today it is the opposite. The police gets away with high crime rate in a region saying registration is high and police also gets away with high rates of unregistered by quoting official figures. This is a key argument in separating the wheat from the chaff, to point where the fault in system is.


Youth is exposed to SLAs, KRAs, deadlines, timelines, budgets and performance-linked bonuses. They are used to customer service with assured service levels and see themselves as customers of the police in regard to law and order. Saada haq aethe rakh generation is here. Gone are the mai-baap days of the government. Bureaucratic control and the desire to retain government service superseded any desire to complain against the system. Not any more as not any more government jobs as well.


Once complete and faithfully recorded, the FIR log is available for all complaints, one can compare police stations’ performance or compare one SHO with his predecessor. It is not rocket science to build in checks in the system against frivolous complaints. We had similar complaints against RTI (Right to Information) but the system stabilizes rather quick. Only voices dissenting on RTI are those whose unbridled power has come under check.


Moreover, any professional knows that availability of good data leads to good decisions. One police station that excels in controlling crime can then share experiences as model for others. Best practices shared like this is not possible without objective fact-driven and data-based system of decision making. Laggards can be identified. Resources can be optimized. Disconnect with people’s aspirations can come to the fore. NCRB (National Crime Records Bureau) publishes data every year. Once the data is reliable, politicians, local leaders, common man can all seek answers and drive police conduct, priorities and resources.


The police can benefit from such clear records by assessing their resources, align its performance and focus on real metrics. It will help the police counter any false propaganda and have credibility. This is bedrock of police reforms. All actions, resources, performance appraisals, promotions, recruitment—all get aligned correctly if results are true to public expectations. It is no different from the citizen’s charter, or a corporate service center with committed service levels.


In the next part I will discuss how the right of FIR actually works.


(Sandeep Khurana is an independent consultant and researcher. Views expressed are personal. He can be reached at his twitter Id @IQnEQ.)



Nitin Sharma

5 years ago

Sir, Excellent article! Eagerly waiting for the next part it actually works. And also, how to ensure implementation and accountability of the police.
Warm Regards.


5 years ago

Registration of FIR IS already a matter of right as also a duty, and like so many other rights is denied to the citizen by India's ruling scum.

Arjun Raghunath Dongare

5 years ago

There are guidelines issued by Supreme Court & various High Courts regarding filing of FIR.But no one ever cares to follow them in letter & spirit.
Whenever a person approaches a lower court to file a private FIR, the court should first ask to police "Whether they have followed the guidelines issued by Supreme Court & High Court?" & if not why?

Vaibhav Dhoka

5 years ago

Yes in India generally FIR is filed at a COST.Only powerful politicians enjoy it ALL FREE.In case of complaint against Kotak Securities Ltd Pune police made me to appear more than 100 times to tell that NO FIR(Due to Kotak officials managed them)During same periods more than 20 FIRs were lodged in cheating and frauds in securities were filed by Pune police.Till we make system of ACCOUNTABILITY mandatory we cannot expect change in system.The commission of inquiry here are to kill public voice.If one goes to find date about commission of inquiry it is MOST DISMAL.General belief is they are to cushion post retirement for SC/HC judges.So FIR must be CIVIL RIGHT.


5 years ago

excellent article.

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