On the other hand, according to the Charities and Voluntary Sector Commission of India (CVS), the BFL was “frozen out” in July.
CVS is a regulator of the sector and is headed by the Reserve Bank of India.
The commission has a role in the creation of the trust and its management and oversight.
The trust has been run by the BFI, the largest financial institution in the country, and it was set up under a law which allows it to raise capital.
What happens when the BFU goes bankrupt?
The trust has a capital of about Rs 1.3 lakh crore, but it’s expected to fall into disrepair over time, especially if the current financial climate is not sustainable.
The government’s decision to set up the trust, which has a turnover of around Rs 1,000 crore, has been welcomed by financial institutions.
“This will help us in making capital available to banks to invest and grow the sector.
We expect the new management of the BFC to be able to help in the long-term sustainability of the organisation,” said Arun Sharma, founder and managing director of Kolkata-based Kunal Investment Partners.
The CVS, however, is sceptical.
“The BFI’s management has no experience in running a private company,” said V.R. Krishnamurthy, chairman and managing partner of the CVS.
“We have heard the argument that the BFA needs a fresh set of eyes to ensure the company does not fail.
But the trust was set-up at the same time as the government was raising money for the National Rural Employment Guarantee Act, 2013.
The BFA has never had a functioning bank account.
We cannot say it is an appropriate way to manage a trust.
It has a long way to go before it can be deemed to be a bank.
So the government has to step in,” said Pratik Varma, managing director and CEO, BFL.”
It was a big risk that the Trust will not be viable for long.
So the government has to step in,” said Pratik Varma, managing director and CEO, BFL.