Non-banking finance companies (NBFCs), which have so far enjoyed the status of being Reserve Bank of India (RBI) regulated financial sector intermediaries with access to public deposits other than banks, may have to suffer a setback if a proposal at restricting entities other than banks from raising public deposits is taken up for consideration. “I am not concluding that only banks have to take deposits,” explained V Leeladhar, deputy governor, RBI, while speaking at a banking seminar in Mumbai on Thursday, “but at an appropriate stage, the proposal of restricting deposit taking activities only to banks may have to be taken up for consideration”.
“As part of the consolidation in the NBFC sector, the number of deposit-taking NBFCs has come down sharply from 710 in 2003 to 376 by March 2008,” Leeladhar said. The amount of public deposits held by them is also down from Rs 5,035 crore (March 2003) to Rs 2,043 crore (March 2007). Residuary non-banking companies (RNBCs) that could not be classified as NBFCs but are registered with the RBI has also declined from five to three but their deposit growth is showing rapid growth. “However, it may be pointed out here that in view of the changes in the operating environment of the RNBCs, their business model has now become non-viable and there is a need for them to explore a new business model,” said Leeladhar.