Shriram lashes out at RBI

At a press conference, group chairman R Thyagarajan clarified that the intention of the advertisement in an English daily (the immediate provocation for RBI’s action) was not to canvas for deposits but “straight-forward compliance of the RBI norms.”

Headded that the legal and secretarial department of the company felt that such an advertisement was necessary as the company was renewing deposits, something which non-rated NBFCs had also been allowed to do under the revised order. He questioned the manner in which the regulator had acted by issuing such a statement without “letting us know that such an action was being contemplated”, adding, “we came to know only from the press.”

However, on sustained questioning, he admitted that some of the branches “might have accepted fresh deposits” after the cut-off date specified by RBI. Thyagarajan attempted to justify the group’s overt violation of RBI guidelines by passing the buck to the RBI itself. “We had written to RBI seeking permission to do so and the RBI had not responded,” he said.

The group appears to be placing its bets on a clause in the January ’98 notification, which allows the regulator to exempt any NBFC in case of `hardship or for any other just and sufficient reasons’ from all or anyof the provisions. Thyagarajan admitted that the RBI had not given any ad interim permission to continue, but said that there was no `specific denial of permission’, since there was no response at all.

RBI’s inexplicable slumber for close to six months on the issue may work to the group’s advantage. Even now, if it weren’t for the advertisement (which RBI has construed to be an attempt to canvass fresh deposits) had not been sent to it by the group itself, it may never have woken up.

Belated or not, a worried Thyagarajan admitted that the RBI’s action would damage the organisation, but claimed that it “could be handled.” The recent NBFC guidelines and the actions of RBI has `put the clock back’ and has prevented the Shriram group from focussing on its core business, he complained.

The group so far has mobilised secured debentures to the extent of Rs 74 crore and has repaid fixed deposits to the extent of Rs 41 crore. “This is very much in line with the RBI norm of repaying one-third of the surplusdeposits over a period of three years beginning January 1, 1998,” he stated. The debentures carry a one per cent higher coupon than the FDs and are backed largely by receivables from truck financing.

He also said that the company proposes to get its secured debenture programme rated. But replied in negative about any possibilityof rating its fixed deposit programme. He added that companies in the group were “not satisfied” with the FD ratings given by the rating agencies as the methodology adopted by them “did not take into account the inherent strength of Shriram group’s asset portfolio.”