The Telegraph
Since 1st March, 1999
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RBI fillip for Peerless

Calcutta, July 16: The Reserve Bank of India has relaxed certain norms for Peerless General Finance & Investment Company Limited (PGFICL), a Calcutta-based residuary non-banking finance company.

The relaxation in norms will allow Peerless, which has a deposit base of more than Rs 8,000 crore, to step up its discretionary lending and show a higher capital adequacy level.

“The decision has been communicated to Peerless. Apart from Peerless, two other RNBCs have been given these relaxations. They are Sahara India Financial Corporation and Ennoble Savings & Investment,” senior officials of the RBI told The Telegraph.

Ever since the RBI has lowered the discretionary lending limit for RNBCs, both Sahara and Peerless have made strong representations to relax it, senior Peerless officials said.

On December 30, 2004, the RBI had come out with a roadmap for RNBCs, where it had said that such companies would have to reduce their discretionary lending to 10 per cent from 20 per cent of deposits by April 2005 and completely do away with it from April 2006.

Following the relaxations, the RNBCs will get more headroom.

Secured loans given to depositors by these three RNBCs against fixed deposits will now be considered as exposure to approved securities. RNBCs are required to park 90 per cent of their aggregate deposit liability in government bonds, PSU bonds, deposits with PSU banks and a set of other investments termed as approved securities. The balance 10 per cent is left to the discretion of the RNBCs.

Thus allowing loans against deposits to be considered as approved security makes room for the company to make more discretionary lending/investment.

Second, RBI has, for the time, fixed a lower risk weightage for RNBCs’ investments in bonds floated by financial institutions. Risk weightage goes in the calculation of the capital adequacy level of the banks and non-banking entities. A higher risk weightage means an entity will need more capital to do the same level of business.

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