Mumbai: Non-bank lenders who held pre-budget consultation meetings with finance minister Nirmala Sitharaman on Tuesday have yet again sought liquidity support from the government and the Reserve Bank of India (RBI). The demands include allowing non-bank lenders to raise liquidity through issuance of “on-tap” secured bonds and non-convertible debentures. NBFCs also want to directly access funds through the on-tap TLTRO scheme of the RBI, a demand which has so far remained unmet.
The representations made to Sitharaman also include allowing term loan credit to small non-banks under the partial credit guarantee scheme.
Non-bank lender’s have also sought exemption of TDS on interest income. Presently, tax is deducted at source at the rate of 30 per cent by securitisation trust from income payable to an investor who is not an individual. This will help bring in parity with bank borrowers. Relaxation of treatment of bad assets under the Ind-AS accounting rules has also been sought.
“NBFCs are the only players in the financial services, which are required to follow Ind AS accounting system, so a specific guidance note should be issued by the Income Tax department covering various aspects of taxation of NBFCs with respect to Ind-AS, harmonizing the provisions of income tax act with that of Ind AS accounting system,” said Raman Agarwal, co-chairman, Finance Industry Development Council (FIDC) an NBFC industry body.
Non-bank lender’s have also requested that interest income on doubtful assets should be made taxable only in the year of receipt and not “on time basis” as the same is notional in nature, as per Ind-AS accounting system.
Lenders have also suggested to the finance ministry that considering the current state of MSMEs and other small borrowers, the Interest Subvention Scheme should be re-launched and be extended to both MSME and Trading Sectors. They have also requested that the one-time restructuring (OTR) schemes launched specifically for MSMEs be extended to the trading and retail community as well.
“The small MSMEs especially those in the retail and services segments have been the worst hit and the OTR benefit should be passed on the marginalised,” said Manish Jaiswal, CEO, Magma Housing Finance. “There is also an urgent need to address risk aversion among banks with regard to NBFCs which is leading to higher interest rates despite a markedly steep cut in market borrowing rates.”
The representations made to Sitharaman also include allowing term loan credit to small non-banks under the partial credit guarantee scheme.
Non-bank lender’s have also sought exemption of TDS on interest income. Presently, tax is deducted at source at the rate of 30 per cent by securitisation trust from income payable to an investor who is not an individual. This will help bring in parity with bank borrowers. Relaxation of treatment of bad assets under the Ind-AS accounting rules has also been sought.
“NBFCs are the only players in the financial services, which are required to follow Ind AS accounting system, so a specific guidance note should be issued by the Income Tax department covering various aspects of taxation of NBFCs with respect to Ind-AS, harmonizing the provisions of income tax act with that of Ind AS accounting system,” said Raman Agarwal, co-chairman, Finance Industry Development Council (FIDC) an NBFC industry body.
Non-bank lender’s have also requested that interest income on doubtful assets should be made taxable only in the year of receipt and not “on time basis” as the same is notional in nature, as per Ind-AS accounting system.
Lenders have also suggested to the finance ministry that considering the current state of MSMEs and other small borrowers, the Interest Subvention Scheme should be re-launched and be extended to both MSME and Trading Sectors. They have also requested that the one-time restructuring (OTR) schemes launched specifically for MSMEs be extended to the trading and retail community as well.
“The small MSMEs especially those in the retail and services segments have been the worst hit and the OTR benefit should be passed on the marginalised,” said Manish Jaiswal, CEO, Magma Housing Finance. “There is also an urgent need to address risk aversion among banks with regard to NBFCs which is leading to higher interest rates despite a markedly steep cut in market borrowing rates.”
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