A parliamentary panel on Thursday suggested a slew of modifications in the bill to regulate non-banking finance companies (NBFCs) including hike in minimum penalty in case of default in repayment to depositors, removal of multiple taxation, extension of securitisation laws and availability of refinance facility. The Standing Committee on Finance headed by Janardhana Reddy suggested hike in the minimum penalty by 10 fold to Rs 500 from Rs 50 for everyday default in repayment of depositors money. In its report on the Financial Companies Regulation Bill 2002, tabled in Parliament on Thursday, the panel also said NBFCs would need the permission of RBI for mergers or winding up processes. Asking the ministry of finance to examine the matter of ‘multiple taxation’ expeditiously, the panel said: ‘‘The genuine concerns of NBFCs should be resolved at the earliest so as to provide level playing field to them vis-a-vis banks.’’ NBFCs have to pay state sales tax, entry tax, service tax while the exemptions enjoyed by banks in terms of provision for bad debts is not extended to them, the panel noted after representations from industry chambers. Favouring NBFCs demand for refinance facility on the lines of NHB, it said ‘‘there is an urgent need for government to initiate steps for healthy and orderly growth of NBFCs along with proper protection on investors’ deposits.’’ ‘‘Government should set up a separate refinancing institution for NBFCs on the lines provided for housing finance companies,’’ it said. The panel suggested that NBFCs should also be allowed to recover NPAs through the securitisation laws. Since absence of effective mechanism for NBFCs to recover their dues was scuttling the growth of this sector, the panel said: ‘‘Unless they recover their dues speedily and effectively, they will continue to make defaults in respect of repayment to their depositors.’’ Referring to similar provisions in NHB Act, it said, ‘‘government should take expeditious steps to extend the provisions of both Securitisation Act of 2002, and recovery of debt due to banks and FIS Act of 1993, to the NBFCs.’’ The panel favoured fee-based activities like collection of insurance premia, to be undertaken by NBFCs after prior approval of RBI. It also suggested a provision to incorporate a specific and clear definition of leasing, hypothecation and other activities carried out by NBFCs. Seeking to dilute the harsh provisions in the Bill allowing police to arrest officials of defaulting nbfcs, the panel said: “the penal provisions could be misused by the law enforcement agency.”
