‘A positive step'

T. T. Srinivasaraghavan, Managing Director of Sundaram Finance, termed the Usha Thorat report “very positive for the NBFC sector”. The report, he felt, recognised the role played by the NBFC sector in last mile credit delivery. “This is very heartening and a significant endorsement by the regulator of the role played by NBFCs in the much talked about financial inclusion,” he said. “Two things clearly stand out. The tax treatment in respect of income-tax deduction for provisions made under the regulations is something we have been asking for many years now. The benefit that is likely to accrue to NBFCs under the SARFAESI Act is also a positive step for the NBFCs,” he said. “We believe that the message that the regulator is looking to send out through this report is to have a greater convergence between the regulation of banks and non-banks. There seems to be a road map for this convergence,” he added. The report, however, did not address the long-standing plea of NBFCs for differential risk weights for different classes of assets financed by NBFCs. While the risk weights for NBFCs with capital market and commercial real estate exposures had been raised, the report had not touched upon the NBFC sector's plea for preferential risk weights for the lower risk assets financed by them, he said. “Asset financing NBFCs have consistently demonstrated their ability to manage retail portfolios with low levels of credit losses and it is only fair that this be duly recognised by the Reserve Bank of India. We will continue our plea with the regulator to consider assigning differential risk weights for different classes of assets, based on their risk categorisation,” he added.

HBL