Allow NBFCs to access global market for borrowings: ASSOCHAM

NEW DELHI: Industry chamber ASSOCHAM said that non-banking financial companies (NBFCs) should be allowed access to international and other sources of borrowings at competitive rates in the interest of overall credit system.

"NBFCs serve vital lending needs of under-served sectors like small and medium enterprises. They should be allowed to deduct provisions for bad debts as an expense before computing taxable income," the chamber said.

It also suggested that the benefits extended to banks should be extended to NBFC sector as well.

Banks are able to recover funds from loans that have gone bad under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest ( Sarfaesi) 2002 Act.

Similarly, NBFCs should also be covered under its provisions for restructuring their loans and sale of non-performing assets, it added.

"To develop markets globally for significant reach of financial services, NBFCs and other financial service companies should be allowed to tap international markets," the chamber said in communication to the Reserve Bank's review group while emphasising on macro-level need for realignment of opportunities for them.

Credit offtake from NBFCs grew by 55 per cent last year as compared to 23 per cent growth in the banking sector due to better business penetration and efficient turnaround time for financing.

Putting curbs on NBFCs can be reflection of non-recognising market forces and significant demand for credit from them, it said.