NBFCs can sell co-branded credit cards
NBFCs can now hope to boost business, with RBI allowing them to issue co-branded credit cards with banks and also to sell MF units by acting as agents to MF companies.
By TNN |
MUMBAI: NBFCs, which have been feeling shackled, can break free a bit. They can now hope to boost business, with RBI allowing them to issue co-branded credit cards with banks and also to sell MF units by acting as agents to MF companies.
The regulator would re-group companies which are involved in financing real or physical assets supporting economic activity such as automobiles, general purpose industrial machinery as asset financing companies (AFCs).
“This will enable NBFCs which are engaged in financing productive assets that contribute to the GDP growth to create a better self image. They would be identified separately from other companies that are primarily in the form of a trust or an investment company involved in buying and selling shares,” said Mahesh Thakkar, director general of Finance Industry Development Council, a self regulatory agency for NBFCs.
Ramesh G Iyer, MD, Mahindra and Mahindra Financial Services, said, “Traditionally, NBFCs have been involved in varied lines of business — asset financing, personal and unsecured loans, stock exchange-related activities and housing finance. The proposed move to classify NBFCs, based on their principal activities, will necessitate different sets of regulations.”
A senior banker told ET that banks would be very selective with regard to issuing a co-branded credit card with NBFCs. Banks would prefer to tie up only with strong NBFCs since the risk is entirely passed on to the bank. What this means is that in case of a default, the bank would have to bear the loss and honour the commitment.
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Recently, Reliance Capital, which is an NBFC, had tied up with Citibank for launching a co-branded credit card. Meanwhile, RBI has constituted an internal group to study issues of regulatory convergence, regulatory arbitrage and to recommend a policy framework for level-playing field in the financial sector. A draft circular based on the recommendation would be placed in the public domain for further feedback by November 3, ‘06. After providing two weeks for comments, the final circular will be issued before November 30, ‘06.
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