Dear Subscriber,

A lot has happened since I last wrote to you. On the positive front, the Union Budget 1997 has been cleared and that should cheer up all classes of income earners and every productive sector of the economy. The report of the R.B.I. on capital account convertibility of the India Rupee, in a definite phased manner, highlights the growing strength of the India Economy. The positive approach of the Indian government is most welcome.

The Financial Services Sector and specially the NBFCs (non-banking finance companies) have been under the prominent NBFC collapsed (CRB Scam). It is relevant to note that chit companies are distinct from NBFCs in the sense that no amount of money remains with the chit company as deposit. All the money collected in an auction interval is auctioned and given away by the chit company every month. This leaves very little scope for any major abnormality taking shape as happened in the case of the collapse of the said NBFC.

The recent enactment of the Reserve Bank of India (Amendment) Act 1997 has been passed in the Parliament and it has been made applicable to the NBFCs. Chit Funds, however, have been left out of the scope of this Act since chit funds are perceived by the RBI to be different from other NBFCs.

Kamal Bhambhani