RBI to allow only banks to aquire public deposits: Leeladhar

Mumbai, Apr 17 (UNI) RBI may think over allowing only banks to acquire public deposits and for that ''a policy has to be looked into'', a deputy governor of Reserve Bank of India (RBI) V Leeladhar said today.

Talking to the newsmen on the sideline of an international banking&finance conference organised by Indian Merchants' Chamber here today, Mr Leeladhar said, ''The number of deposits taking companies, that is non-banking financial companies (NBFCs), are coming down sharply and the amount of deposits, which they are having, is also coming down sharply, so perhaps the time has come, where we can now think of only allowing banks to acquire public deposits.'' A policy has to be looked into, he said, adding that the policy will not ask to immediately stop deposits takings by the NBFCs.

Earlier in his key note address, Mr Leeladhar said that Reserve Bank had given an option to the NBFCs to voluntarily move out of public deposits acceptance activity, if they found the regulatory costs outweighed their benefits.

''In case an NBFC voluntarily chooses to get out of public deposits, the Reserve Bank would, in fact, help the NBFC in its efforts, including imparting training and technology support,'' he said.

The deputy governor also pointed out that the number of non-deposit taking NBFCs (NBFCs-ND) declined from 13,139 as on June 2003 to 12,458 as at end of March 2008.

The total deposits of NBFCs as on March 31, 2007 were Rs 24,665 crore, of which, the deposits with deposit-taking NBFCs, other than the RNBCs, were Rs 2,043 crore, forming only 8.3 percent of the total public deposits of the NBFCs.

Taking into account the declining number of deposit-taking NBFCs, declining trend of public deposits held by NBFCs, strengthening of regulatory prescription in case of NBFCs-ND-SI and RNBCs, low level of NPAs and relatively lower level of bank borrowings by the sector, the potential systemic risk from this segment is low at this point of time, even as the process of consolidation is gaining momentum.

''In these circumstances, at the appropriate stage, the proposal of restricting public deposit taking activities only to banks may have to be taken up for consideration,'' Mr Leeladhar added.

UNI PP SR SKB1542