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Regulate NBFCs, introduce VAT, FM urges states

Finance Minister Yashwant Sinha has sought the co-operation of the states in carrying out sales tax reforms and improving regulatory framework governing non-banking financial companies.

Addressing the state chief ministers and finance ministers conference in New Delhi, Sinha outlined the steps state governments should take for introduction of value added tax. The conference has been convened to discuss measures for regulating NBFCs, the progress on introduction of VAT by state governments and stamp duty reforms.

The finance minister said it was the government's endeavour to work towards a healthy NBFC sector in such a manner that the depositors are enabled to make better informed investment decisions and also provide a greater degree of comfort by the RBI regulations.

''Our response to the problems, however, must be properly modulated so that better performing NBFCs are encouraged to grow along sound and healthy lines,'' Sinha said.

He said a pro-active role by state governments in certain areas can help in complementing and supplementing the efforts of the Union government and the Reserve Bank of India and help in preventing frauds being perpetuated on unsuspecting depositors and also in redressal of depositors' grievances.

The finance minister said while the failure of new NBFCs cannot be ruled out even in an environment of strict regulations, it would be the government's endeavour to work towards a healthy NBFC sector with adequate disclosure norms and strict prudential stipulations so that the prospective depositors can take better informed investment decisions and are provided a greater degree of comfort by improved regulatory framework. ''I solicit your co-operation and considered views on the subject,'' he said.

''We cannot fight today's battles with yesterday's weapon. We will have to refashion them, redesign them and restructure them so that we can meet the challenge before us successfully,'' Sinha said.

UNI