‘Certain NBFCs should be allowed to raise deposits’

livemint.com:

₹1.2-1.3 trillion. Ajay Piramal, chairman and executive director, Piramal Enterprises, said if the Reserve Bank of India (RBI) allows certain non-banking financial companies (NBFCs) to accept public deposits, it will lessen their dependence on bank funding. Edited excerpts: Earlier, NBFCs used to have some advantage; there was a little more loosening in terms of RBI control compared to banks.

They are tightening up all the processes and, when I see the inspection which the RBI is doing today, it is quite detailed and the arbitrage which you had between NBFCs and banks in terms of regulations is reducing. We are also adapting to that situation by getting more and more of our compliance in line with what RBI wants. Not only that, but we are going one step ahead so that we are best prepared to meet the requirements.

We are just making our systems processes and people ready. Let us see what happens. The fact is that there are not enough banks in the country and if India has to grow, you will have to increase banking.

You saw the governor’s statement when he met the CEOs a few days ago, saying NBFCs should not rely on funding from banks. Today, financing of NBFCs by banks is very skewed and over 50% is from banks. The RBI is also concerned that if there is a crisis, then both will come together.

If that has to happen, then you have to open other avenues for NBFCs. On one side, you are saying that the regulations are becoming tighter and the arbitrage gap between banking and NBFCs is really coming down, and on the other, you are saying that NBFCs must shift from raising funds only from banks. The fact is growth is required, and NBFCs reach those areas which banks cannot.