To strengthen the NBFC sector, a Finance Ministry-appointed committee has suggested that non-banking finance companies should be allowed to recover bad loans in line with banks by bringing them under the Recovery of Debts Due to Banks Act.
The advisory group under the Chairmanship of Mr Alok Nigam, Joint Secretary (Banking Operations), recommended that NBFCs should be allowed to recover their debt in line with banks.
The committee has urged the Finance Ministry to consider bringing NBFCs under the purview of the Recovery of Debts Due to Banks (RDDB) Act. “It would empower NBFCs in recovering their loans at par with banks and without significant delays. The existing procedure for recovery of debts by NBFCs, which takes a lot of time, has resulted in NBFCs treating a significant portion of their debts as unproductive loans,” the report submitted by the group said.
The advisory group, which was constituted in September, 2011, suggested extending the provisions of wilful defaulters to NBFCs. In case of deliberate loan defaults, it said, credit information goes to credit information companies (such as CIBIL), which in turn alert banks and financial institutions as to ensure that further bank finance is not made available to them.
The panel also favoured exclusion of non-banking finance companies (NBFCs) from states' Money Lenders Act.