The non-banking finance companies (NBFCs) are increasingly being subjected to the same rigour as banks. In terms of regulation, they have for long been denied their rightful parity with other constituents of the financial system, in spite of the fact that the NPAs of asset financing NBFCs have been consistently lower than that of most banks, according to S. Viji, Chairman, Sundaram Finance Limited.
Addressing shareholders at the annual general meeting on Thursday, Mr. Viji said the demands of NBFC-AFCs for parity with banks and housing finance companies in respect of differential risk weights for different asset classes, tax treatment of NPA provisions and income relating to NPA accounts had sadly fallen on deaf ears. Viewed in the context of recent and impending regulatory actions, these issues took on even greater significance, he said. The capital adequacy requirements for all NBFCs had been raised from 12 to 15 per cent, significantly higher than that required for banks, he added. Mr. Viji said based on a detailed analysis of the RBI guidelines, the directors were of the considered view that it was not in the long-term interests of the stakeholders to apply for a banking licence.