Asset limit of NBFCs to go up

MUMBAI, Aug 25: The Reserve Bank of India is raising the threshold limit of assets and income for the equipment leasing and hire purchase f...

MUMBAI, Aug 25: The Reserve Bank of India is raising the threshold limit of assets and income for the equipment leasing and hire purchase finance companies.

Going by the new norms, only those NBFCs whose assets and income constitute 60 per cent or more of their total assets and income will be recognised as equipment leasing and hire-purchase companies. At present, NBFCs with assets and income constituting 51 per cent and 33 per cent of their total assets and income, respectively, are recognised as equipment leasing and hire-purchase companies.

The central bank will give the existing leasing and hire-purchase finance companies time to meet this new requirement, RBI sources said. Senior officials at the Association of Leasing & Financial Services (ALFS) interpret the RBI decision to revise the classification norms of non-banking finance companies (NBFC) as a move to encourage the leasing and hire-purchase business.

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Though there have been demands from certain sections of the industry to do away with the system of classification of NBFCs into various categories, the RBI has said that the classification is done on the basis of principal business and it would therefore be necessary to differentiate NBFCs for setting out discriminatory dispensation.

RBI, with a view to setting out foolproof disclosure standards in the accounts of NBFCs, has constituted an in-house study group with members from the Institute of Chartered Accountants of India.

The study group will focus on removing the shortcomings in the existing reporting formats of the balance sheet and profit and loss account as prescribed under the Companies Act, 1956. The format of the financial statements — when reviewedis expected to make the affairs of an NBFC more transparent.