The final decision would be taken by the government shortly. Currently, he said, the RBI was working out a legislation for NBFCs. Under the new law there will be a regulatory authority for the NBFCs.

Dayal pointed out that the report on NBFCs prepared by the C M Vasudev had underlined the need for a separate regulator for the NBFCs. The government, he added, was also gearing up to introduce the changes in the Debt Recovery Tribunal Act in Parliament in the Winter Session.

Speaking at the conference, chief economic advisor Shankar Acharya said interest rates were unlikely to come down as long as governmentcontinued to borrow huge funds from the market. Fiscal deficit would have to be brought down for the interest rates to soften, he added.

However, the prime lending rate (PLR) of banks have come down substantially since the early 1990s from 19 per cent to about 12-13 per cent, he said. On reducing deposit rates to bring down lending rates, he said any reduction in deposit rates would see funds flowing into other channels as the investor had many options now. "Controlling interest rates by government will see flow of funds into other channels and the lendable resources with the banks would come down," he added.

Dismissing suggestions that inflation rates have come down due to recession in the manufacturing sector, Acharya said prices have come down due to better supply side management and transparent import policy. The record agricultural production in 1998-99 also contributed to the decline in prices, he added.

Finance secretary P G Mankad said government had no "immediate plans" to dismantle and replaceexisting mechanism for disinvestment of government stake in public sector undertakings.

He, however, added that the disinvestment exercise was relatively new in the country and the government could move to a different system in the future as various different options were being considered.

Special fund for states likely

NEW DELHI: The Government will introduce a bill in the winter session of the Parliament to create a special fund to help those states which agree to bring about more reforms.

Addressing the Economic Editors' Conference, Finance Minister Yashwant Sinha said that during the states chief minister's conference on Tuesday, CMs expressed the need for bringing about fiscal reforms and eschew populism. He said it was wrong to say that states were anti-reforms.

The Finance Minister said that the proposed special fund will be similar to the present MoUs which the Finance Ministry has signed with nine states (where fiscal help is extended by the Centre).

These nine states havepromised to implement reforms by hiking user charges within a definite time frame. Making a special reference of Punjab which has signed an MoU with the Central Government but till date not honoured its tenet, Sinha said that he was confident that Punjab will be able to honour the MoU within the time frame.

On the much-talked about second generation reforms, the Finance Minister said that there was no need to wait for a formal launch of the second generation reforms as it has already begun.