The Hindu : Business : Plea to review `connected lending'

Online edition of India's National Newspaper
Thursday, May 31, 2007
ePaper

Business

Business

Plea to review `connected lending'

Special Correspondent

CHENNAI: The Reserve Bank of India's recent stipulation (as part of corporate governance guidelines for non-banking finance companies) that there should be no "connected lending" to subsidiaries is bad in principle, according to T.T.Srinivasaraghavan, Managing Director of SFL.

Replying to questions at a press conference here on Wednesday, Mr Srinivasaraghavan said subsidiaries were not in the same class as others mentioned in "connected lending" like family and relatives. SFL did have outstanding in terms of "connected lending" (which, as per RBI guidelines, have to be repaid within a stipulated period), but the amount involved was marginal, he said.

"We have represented to the regulator on this issue... Subsidiaries are our babies and if we cannot support them, who will?" Mr Srinivasaraghavan said He pointed out that the Companies Act did not prohibit connected lending but only required prior permission and there was no bar under the Act in respect of lending to subsidiaries

He said SFL's emphasis had always been on quality of assets and not growth of the topline This was one reason why the non-performing assets stood at a mere 0.58 per cent in 2006-07, which was still lower than 0.81 per cent recorded in the previous year The company was a rare instance in the industry of abstaining from outsourcing of appraisal of loan applications, he said. The company did not also employ recovery agents.

He said the growth of the business was integrally bound up with the performance of agriculture. The failure of the mango crop in Andhra Pradesh has had a negative impact, while the prospects of the monsoon were awaited.

Printer friendly page
Send this article to Friends by E-Mail

Business

News Update

Stories in this Section