RBI package on rupee to raise interest rates — CII

With the introduction of new regulations for NBFCs by RBI, the commercial banks have shown greater reluctance for extending bank finance even to well run NBFCs, it said adding there is a need to incorporate adequate measures to ensure expeditious recovery of debts by these finance companies.

Stating that there was a need to remove impediments to encourage securitisation, CII said RBI could take a lead in this by reducing stamp duty and addressing issues relating to foreclosure laws and transfer of income and property.

On the recently announced RBI guidelines for the issue of commercial paper, CII said that while presently the minimum tenor of commercial paper is 15 days, there is a need to move towards international norms, which do not stipulate any minimum tenor.

"Stamp duty on commercial paper should be on an annualised basis instead of a flat rate being levied now," the chamber said adding the commercial paper should be delinked from working capital limits.

Absence of a quick and efficient system of legal redressal constitutes an important `moral hazard’ in the financial sector as it encourages imprudent borrowing, CII said adding the NBFCs sector has been facing this problem along with the banks and the financial institutions.

"There is a need for suitable amendments to the Income Tax Act to restore parity amongst the various constituents of the financial system," it said.

CII said that there was a need to impress upon the banks to treat the NBFCs engaged in asset financing as their extended arm so that the banks could also perform their role of providing finance to small and medium enterprises and participate in the economic development.