New norms good for health of NBFC sector: Muthoot Finance

The Reserve Bank of India (RBI) has released the Usha Thorat committee report on non-banking finance companies (NBFCs) which speaks about the issues and concerns of NBFCs.

One of the recommendations of the report says, NBFC's with assets over Rs 1,000 crore should be inspected comprehensively on an annual basis with an asset stress test to ascertain their vulnerability. George Alexander Muthoot, managing director, Muthoot Finance welcomed the recommendations made in the report. In an interview to CNBC-TV18, he said, "All NBFCs and big companies are inspected once in two years. Here after if it comes once in a year it is good for the industry." According to Muthoot, other norms like12% CRAR and the minimum capital requirement of Rs 50 crore for new NBFC are good for the micro-finance industry. Below is the edited transcript of the interview with CNBC-TV18. Q: I would assume that Rs 1,000 crore asset book is something that you would be concerned about, you will have onsite Reserve Bank supervision it looks like. What is your first comment on everything you heard? A: It is definitely good for NBFC industry. NBFCs getting little more inspections and controls from the RBI is good for the health of NBFC sector as a whole. All NBFCs and big companies are inspected once in two years. Here after if it comes once in one year it is good for the industry. The other norms like the 12% CRAR and the minimum capital requirement of Rs 50 crore for new NBFC are good for the micro-finance industry. We have no exposure to capital and real estate markets. RBI coming out with norms for real estate exposure and capital norms are good for the health of the industry. Q: Would you have to raise more capital because tier-I capital has to be 12%, what's yours? A: We already have 12% capital adequacy. Q: Would you expect that a lot of companies may have 15% capital adequacy but tier-I 12% will be difficult? A: Some of the companies might have some issue on that, I am not sure. But, 12% should be reasonable.