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PFC to diversify as RBI tightens leash

Power Finance Corporation has hired Deloitte to help it evaluate various options for diversifying into new businesses, including applying for a new bank licence, as the state-run lender fears its current business model may not be sustainable in the long run.

Power Finance Corporation (PFC) has hired Deloitte to help it evaluate various options for diversifying into new businesses, including applying for a new bank licence, as the state-run lender fears its current business model may not be sustainable in the long run.

This follows a proposal by the RBI to tighten capital requirements and provisioning norms for NBFCs, such as PFC and Rural Electrification Corp (REC). The central bank proposed that NBFCs must classify loans as non-performing assets within 90 days of non-payment, bringing them on par with banks. NBFC’s loans are currently classified as non-performing assets if they are not repaid after 180 days. ?We thought of examining in the very long term as to whether the NBFC structure will be suitable for us after 10 to 15 years,? said PFC CMD Satnam Singh.

He said PFC will talk to RBI to keep prevailing provisioning laws for NBFC. ?The funding of infrastructure companies is such that we cannot ask them for repayment on a monthly basis. That is why repayment is on a quarterly basis. We are not waiting for three quarters like these banks third repayment. To my mind, 180 days has a very good rationale.?

Deloitte is expected to make a presentation on diversification plans in the next board meeting, including applying for a new bank licence in collaboration with foreign banks, he added.

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First published on: 14-12-2012 at 01:25 IST
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