Finance cos asked to take stock

The Reserve Bank has asked finance companies to take a close look at their exposure to corporates in order to avoid diversion of funds to the commodity market. The central bank has asked systemically important non-deposit taking non-banking finance companies NBFCs to scrutinise their exposure to large borrowers for purchase of foodgrains to detect any possibility of hoarding by such entities.

Acting on concerns that some corporates or entities may be hoarding foodgrains by availing NBFC finance, the Reserve Bank asked all NBFCs with asset sizes of Rs 100 crore and above to scrutinise and confirm to themselves that funds have not been diverted for the purpose of hoarding.

The RBI asked the NBFCs to submit a comprehensive report on the matter by March 10. 8220;There were reports that some companies used NBFC money to procure foodgrains for profiteering. The sharp rise in prices of various commodities might have prompted some corporates to take this route,8221; said a banking source.

In fact, the rising foodgrain prices were responsible for the surge in inflation in the last three months. In a bid to check inflation. the RBI had already hiked CRR twice and repo rate once in the last three months.