All specialised leasing companies to become fincos’
All specialised Leasing Companies (LCs) have been requested by the Central Bank (CB) to convert to finance companies – similar to what People’s Leasing Company did recently, officials said. “This is because we wanted them to be better regulated as finance companies are (better) regulated than LCs. Last Tuesday when we met with the leasing firms and the finance firms, we told the LCs to convert to finance companies,” a CB official told the Business Times. He said they had agreed to do so, but a timeline wasn’t given. “It was only a request and they agreed,” he added. LCs specialise in leasing and when they migrate to becoming finance companies, they will be able to mobilise deposits, he said. The industry which has seen a significant drop can register some growth through this move, according to analysts.
The official explained that all finance companies have to be listed and this too is a plus point on corporate governance. “Also then there’s more transparency,” he added. The leasing industry recorded a significant growth of 120 per cent in 2010/2011 and this year so far it has seen a 60 per cent drop. The industry is made up of Registered Finance Leasing Establishments (RFLE) which is 69 entities and includes finance companies, commercial banks and specialised banks.
Analysts say that LCs and finance firms, with the expertise they hold in the vehicle market, have a unique positioning which has resulted in a competitive advantage for them in the leasing and hire purchase market over the other leasing establishments. The leasing industry is directly driven by the number of new vehicles imported and registered.
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