ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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UTTAR PRADESH-Electoral Calculations

bonds, of the aggregate assets of Rs 2,767.36 crore of 95 hire-purchase and leasing companies at the end of 1990-91 Rs 68.21 crore represented various investments, having risen sharply from Rs 34.91 crore in 1988-89 and Rs 57.57 crore in 1989-90. As a proportion of total assets this may not seem alarming, but we have no information on what has happened in later years when the share market has been booming. In any case, there can be no gainsaying the NBFCs' potential to play havoc with share prices. The danger has to be viewed in the context of the enormous growth of deposits of the NBFCs. Deposits of financial . companies had constituted 4 per cent of aggregate scheduled bank deposits in March 1981,but by March 1993 the proportion had gone up to 8.9 per cent. The average annual growth of NBFCs' deposits in the three-year period ending March 1993 (about 30 per cent) has been nearly twice that achieved by scheduled commercial banks (17 per cent). It is significant that this impressive performance has been achieved when there has been severe competition for funds from the capital market in general and from the UTI and other mutual funds in particular. The principal motivation for placing deposits with NBFCs has been tax evasion and deployment of unaccounted incomes and assets; the same reasons lead many borrowers as well to prefer NBFCs. Not surprisingly, lack of transparency and failure to make essential financial disclosures have been a characteristic feature of the NBFCs' operations. If, in addition, the share markets are to be opened up for them, as they in fact have been, the risks for the large number of small depositors and the systemic damage to the financial and capital markets should not be difficult to imagine.

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