More than 20 NBFCs closed down in May alone

New Delhi, May 30 (KNN) As many as four Non-Banking Financial Companies (NBFCs) have surrendered their certificates of registration to the Reserve Bank of India (RBI) on Tuesday.

This month alone more than 20 NBFCs have stopped operations. It must be noted that for the credit hit MSME sector, NBFCs are crucial source to seek funding.

The NBFCs which surrendered their certificates on Tuesday are – Kolkata based Silver Trading and Services Limited and Lotus Udyog Limited; Chennai based Kothari Safe Deposits Limited; and Angel Finvest Private Limited.

Also, it is noteworthy that the NBFCs offer relatively higher interest rates on their fixed deposit schemes, somewhere in the range of 8 to 8.5 per cent whereas the Public Sector Banks offer 7-8% rates on FDs.

However, to regulate or keep strict view over the NBFCs, considered riskier than the banks, RBI had introduced a facility of ombudsman in February this year under the Ombudsman Scheme For Non-Banking Financial Companies, 2018.

The scheme of ombudsman has initially been introduced at the four metro centres of Chennai, Kolkata, Mumbai and New Delhi for handling complaints from the respective zones, so as to cover the entire country. The scheme came into effect from February 23.

The rating of NBFCs are also a crucial factor, as ones with credit rating of A to AAA are safer as compared with the NBFCs with B to BBB ratings.

Meanwhile, according to a media report quoting RTBI data, loans to NBFCs formed nearly 40 percent of all new corporate loans from banks in FY18.

Bank loans outstanding to corporates rose by Rs 2.68 lakh crore in FY18, of which Rs 1.05 lakh crore or 39.3 percent were to NBFCs, according to the report.

According to the report, outstanding loans in the NBFC sector grew 27 percent YoY, the sharpest jump among all the sectors in industry and services.

The data suggests that retail loans are growing at a faster rate than what is reflected directly. This is because most NBFCs focus on small-ticket and MSMEs. (KNN Bureau)