......More disturbing is RBI’s belief that NBFCs are immortal. They have permitted NBFCs to issue ‘perpetual bonds’ to investors, with a 10-year option that enables NBFCs to repay but prevents the investors from demanding repayment. It is akin to writing off your wealth for a fixed rate of interest. RBI works in favour of NBFCs by just letting them increase the interest rate by a mere one percent at the end of the 10th year......
Read - Moneylife
My View.......
The issues raised deserve wide publicity and debate among people who can throw light on behaviour of interest rates. Less secure the investment you make, chances are you get higher rates of interest in the short term. NBFCs and NBFC-like institutions and even certain individuals have mobilised huge amounts of money in the past and vanished. To protect the interests of small investors, government and banks should come out with investment instruments with reasonable return. Regulators and GOI, as part of efforts to promote financial literacy, should promote awareness about the risk in being lured by advertisements offering ‘higher than possible’ returns on investments.
- M G WARRIER
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