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Home >> FAQs - Display
Date: 05/02/2007
Non-Banking Financial Companies

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<span id="lblData" class="text4"><tr class='tablecontent2'><td class=text14 align=center><B>Non-Banking Financial Companies</B> </td></tr> <tr bgcolor='ffffff'> <td ><div align='center'></div>
<B><FONT FACE='Arial'><U>
<P ALIGN='CENTER'></P>
<P ALIGN='CENTER'><font face='Arial, Helvetica, sans-serif' size='2'>FOREWORD</font></P>
</u></font></B><FONT FACE='Arial'>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>The Reserve
Bank of India is entrusted with the responsibility of regulating and supervising
the Non-Banking Financial Companies by virtue of powers vested in Chapter III
B of the Reserve Bank of India Act, 1934. The regulatory and supervisory objective,
is to:</font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'> <font face='Arial, Helvetica, sans-serif' size='2'>a) ensure
healthy growth of the financial companies;</font>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'> <font face='Arial, Helvetica, sans-serif' size='2'>b) ensure
that these companies function as a part of the financial system within the policy
framework, in such a manner that their existence and functioning do not lead
to systemic aberrations; and that</font>
<P ALIGN='JUSTIFY'></P>
<font face='Arial, Helvetica, sans-serif' size='2'>c) the quality of surveillance
and supervision exercised by the Bank over the NBFCs is sustained by keeping pace
with the developments that take place in this sector of the financial system.</font>
<p></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>It has been
felt necessary to explain the rationale underlying the regulatory changes and
provide clarification on certain operational matters for the benefit of the
NBFCs, members of public, rating agencies, Chartered Accountants etc. To meet
this need, the clarifications in the form of questions and answers, is being
brought out by the Reserve Bank of India (Department of Non-Banking Supervision)
with the hope that it will provide better understanding of the regulatory framework.</font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>The information
given in the FAQ is of general nature for the benefit of depositors/public and
the clarifications given do not substitute the extant regulatory directions/instructions
issued by the Bank to the NBFCs.</font></P>
<P ALIGN='RIGHT'><font face='Arial, Helvetica, sans-serif' size='2'> (Shekhar
Bhatnagar)<BR>
General Manager In-Charge</font></P>
<B>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>February
5, 2007</font></P>
<hr>
<P><font face='Arial, Helvetica, sans-serif' size='2'>Frequently Asked Questions
on NBFCs</font></P>
</B>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
-1 What is a Non-Banking Financial Company (NBFC)?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
-1 A Non-Banking Financial Company (NBFC) is a company registered under the
Companies Act, 1956 and is engaged in the business of loans and advances, acquisition
of shares/stock/bonds/debentures/securities issued by Government or local authority
or other securities of like marketable nature, leasing, hire-purchase, insurance
business, chit business but does not include any institution whose principal
business is that of agriculture activity, industrial activity, sale/purchase/construction
of immovable property. A non-banking institution which is a company and which
has its principal business of receiving deposits under any scheme or arrangement
or any other manner, or lending in any manner is also a non-banking financial
company (Residuary non-banking company).</font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES
</b>2. NBFCs are doing functions similar to banks. What is difference between
banks & NBFCs ?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
2. NBFCs are doing functions akin to that of banks, however there are a few
differences:</font></P>
<P ALIGN='JUSTIFY'> <font face='Arial, Helvetica, sans-serif' size='2'>(i) a NBFC
cannot accept demand deposits; </font> <br>
<font face='Arial, Helvetica, sans-serif' size='2'>(ii) it is not a part of
the payment and settlement system and as such cannot issue cheques to its customers;
and</font> <br>
<font face='Arial, Helvetica, sans-serif' size='2'>(iii) deposit insurance facility
of DICGC is not available for NBFC depositors unlike in case of banks.<br>
</font><br>
<B>
<P ALIGN='JUSTIFY'></P>
</B>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>-3.
Is it necessary that every NBFC should be registered with RBI?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
3. In terms of Section 45-IA of the RBI Act, 1934, it is mandatory that every
NBFC should be registered with RBI to commence or carry on any business of non-banking
financial institution as defined in clause (a) of Section 45 I of the RBI Act,
1934.</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>However,
to obviate dual regulation, certain category of NBFCs which are regulated by
other regulators are exempted from the requirement of registration with RBI
viz. Venture Capital Fund/Merchant Banking companies/Stock broking companies
registered with SEBI, Insurance Company holding a valid Certificate of Registration
issued by IRDA, Nidhi companies as notified under Section 620A of the Companies
Act, 1956, Chit companies as defined in clause (b) of Section 2 of the Chit
Funds Act, 1982 or Housing Finance Companies regulated by National Housing Bank.</font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
4. What are the different types of NBFCs registered with RBI?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
4. The NBFCs that are registered with RBI are: </font></P>
<P ALIGN='JUSTIFY'> <font face='Arial, Helvetica, sans-serif' size='2'>(i) equipment
leasing company; </font> <br>
<font face='Arial, Helvetica, sans-serif' size='2'>(ii) hire-purchase company;
</font> <br>
<font face='Arial, Helvetica, sans-serif' size='2'>(iii) loan company; </font>
<br>
<font face='Arial, Helvetica, sans-serif' size='2'>(iv) investment company.</font>
<p></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>With effect
from December 6, 2006 the above NBFCs registered with RBI have been reclassified
as </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>(i) Asset
Finance Company (AFC)<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>(ii) Investment Company
(IC)<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>(iii) Loan Company
(LC)</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>AFC would
be defined as any company which is a financial institution carrying on as its
principal business the financing of physical assets supporting productive /
economic activity, such as automobiles, tractors, lathe machines, generator
sets, earth moving and material handling equipments, moving on own power and
general purpose industrial machines. Principal business for this purpose is
defined as aggregate of financing real/physical assets supporting economic activity
and income arising therefrom is not less than 60% of its total assets and total
income respectively. </font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>The above
type of companies may be further classified into those accepting deposits or
those not accepting deposits. </font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Besides
the above class of NBFCs the Residuary Non-Banking Companies are also registered
as NBFC with the Bank. </font></P>
<B>
<P ALIGN='JUSTIFY'></P>
</B>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
5. What are the requirements for registration with RBI?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
5. A company incorporated under the Companies Act, 1956 and desirous of commencing
business of non-banking financial institution as defined under Section 45 I(a)
of the RBI Act, 1934 should have a minimum net owned fund of Rs 25 lakh (raised
to Rs 200 lakh w.e.f April 21, 1999). The company is required to submit its
application for registration in the prescribed format alongwith necessary documents
for Bank’s consideration. The Bank issues Certificate of Registration after
satisfying itself that the conditions as enumerated in Section 45-IA of the
RBI Act, 1934 are satisfied. </font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
6. Where one can find list of Registered NBFCs and instructions issued to NBFCs?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
6. The list of registered NBFCs is available on the web site of Reserve Bank
of India and can be viewed at www.rbi.org.in. The instructions issued to NBFCs
from time to time are also hosted at the above site. Besides, instructions are
also issued through Official Gazette notifications. Press Release is also issued
to draw attention of the public/NBFCs.</font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
7. Can all NBFCs accept deposits and what are the requirements for accepting
Public Deposits?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
7. All NBFCs are not entitled to accept public deposits. Only those NBFCs holding
a valid Certificate of Registration with authorisation to accept Public Deposits
can accept/hold public deposits. The NBFCs accepting public deposits should
have minimum stipulated Net Owned Fund and comply with the Directions issued
by the Bank. </font></P>
<B>
<P ALIGN='JUSTIFY'></P>
</B>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
8. Is there any ceiling on acceptance of Public Deposits? What is the rate of
interest and period of deposit which NBFCs can accept?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
8. Yes, there is ceiling on acceptance of Public Deposits. A NBFC maintaining
required NOF/CRAR and complying with the prudential norms can accept public
deposits as follows:</font></P>
<P ALIGN='JUSTIFY'></P>
</FONT>
<P ALIGN='CENTER'>
<CENTER>
<TABLE BORDER CELLSPACING=1 CELLPADDING=2 align='center' bordercolor='#000000'>
<TR>
<TD VALIGN='TOP'> <B><FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Category
of NBFC</font>
</font></b>

</TD>
<TD VALIGN='TOP'> <B><FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Ceiling
on public deposits</font>
</font></b>

</TD>
</TR>
<TR>
<TD VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>AFCs
maintaining CRAR of 15% <br>
without credit rating </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>AFCs
with CRAR of 12% and having <br>
minimum investment grade credit rating</font>
</FONT></TD>
<TD VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>1.5
times of NOF or Rs 10 crore<br>
whichever is less<br>
</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>4
times of NOF</font></P>
</FONT></TD>
</TR>
<TR>
<TD VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>LC/IC
with CRAR of 15% and <br>
having minimum investment <br>
grade credit rating </font>
</FONT></TD>
<TD VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>1.5
times of NOF </font></P>
<P ALIGN='JUSTIFY'>
</FONT></TD>
</TR>
</TABLE>
<br>
</CENTER>
<p></P>
<FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Presently,
the maximum rate of interest a NBFC can offer is 11%. The interest may be paid
or compounded at rests not shorter than monthly rests.</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>The NBFCs
are allowed to accept/renew public deposits for a minimum period of 12 months
and maximum period of 60 months. They cannot accept deposits repayable on demand.</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>The RNBCs
have different norms for acceptance of deposits which are explained elsewhere
in this booklet.</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
9. What are the salient features of NBFCs regulations which the depositor may
note at the times of investment? </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
9. Some of the important regulations relating to acceptance of deposits by NBFCs
are as under:</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>i) The NBFCs
are allowed to accept/renew public deposits for a minimum period of 12 months
and maximum period of 60 months. They cannot accept deposits repayable on demand.<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'> ii) NBFCs cannot
offer interest rates higher than the ceiling rate prescribed by RBI from time
to time. The present ceiling is 11 per cent per annum. The interest may be paid
or compounded at rests not shorter than monthly rests. </font> <br>
<font face='Arial, Helvetica, sans-serif' size='2'>iii) NBFCs cannot offer gifts/incentives
or any other additional benefit to the depositors.<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>iv) NBFCs (except
certain AFCs) should have minimum investment grade credit rating.</font> <br>
<font face='Arial, Helvetica, sans-serif' size='2'>v) The deposits with NBFCs
are not insured.</font><br>
<font face='Arial, Helvetica, sans-serif' size='2'>vi) The repayment of deposits
by NBFCs is not guaranteed by RBI.<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>vii) There are certain
mandatory disclosures about the company in the Application Form issued by the
company soliciting deposits.</font>
<p></P>
<B>
<P ALIGN='JUSTIFY'></P>
</B>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
10. What is ’deposit’ and ’public deposit’? Is it defined anywhere?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
10. The term ’deposit’ is defined under Section 45 I(bb) of the RBI Act, 1934.
’Deposit’ includes and shall be deemed always to have included any receipt of
money by way of deposit or loan or in any other form but does not include:</font></P>
<UL>
<P ALIGN='JUSTIFY'>
<LI><font face='Arial, Helvetica, sans-serif' size='2'>amount raised by way
of share capital, or contributed as capital by partners of a firm;</font></LI>
<p></P>
<P ALIGN='JUSTIFY'>
<LI><font face='Arial, Helvetica, sans-serif' size='2'>amount received from
scheduled bank, co-operative bank, a banking company, State Financial Corporation,
IDBI or any other institution specified by RBI;</font></LI>
<p></P>
<P ALIGN='JUSTIFY'>
<LI><font face='Arial, Helvetica, sans-serif' size='2'>amount received in ordinary
course of business by way of security deposit, dealership deposit, earnest
money, advance against orders for goods, properties or services;</font></LI>
<p></P>
<P ALIGN='JUSTIFY'>
<LI><font face='Arial, Helvetica, sans-serif' size='2'>amount received by a
registered money lender other than a body corporate;</font></LI>
<p></P>
<P ALIGN='JUSTIFY'>
<LI><font face='Arial, Helvetica, sans-serif' size='2'>amount received by way
of subscriptions in respect of a ’Chit’.</font></LI>
<p></P>
</UL>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Paragraph
2(1)(xii) of the Non-Banking Financial Companies Acceptance of Public Deposits
( Reserve Bank) Directions, 1998 defines a ’ public deposit’ as a ’deposit’
as defined under Section 45 I(bb) of the RBI Act, 1934 and further excludes
the following:</font></P>
<P ALIGN='JUSTIFY'></P>
<UL>
<P ALIGN='JUSTIFY'>
<LI><font face='Arial, Helvetica, sans-serif' size='2'>amount received from
the Central/State Government or any other source where repayment is guaranteed
by Central/State Government or any amount received from local authority or
foreign government or any foreign citizen/authority/person;</font></LI>
<p></P>
<P ALIGN='JUSTIFY'>
<LI><font face='Arial, Helvetica, sans-serif' size='2'>any amount received from
financial institutions;</font></LI>
<p></P>
<P ALIGN='JUSTIFY'>
<LI><font face='Arial, Helvetica, sans-serif' size='2'>any amount received from
other company as inter-corporate deposit;</font></LI>
<p></P>
<P ALIGN='JUSTIFY'>
<LI><font face='Arial, Helvetica, sans-serif' size='2'>amount received by way
of subscriptions to shares, stock, bonds or debentures pending allotment or
by way of calls in advance if such amount is not repayable to the members
under the articles of association of the company;</font></LI>
<p></P>
<P ALIGN='JUSTIFY'>
<LI><font face='Arial, Helvetica, sans-serif' size='2'>amount received from
shareholders by private company; </font></LI>
<p></P>
<P ALIGN='JUSTIFY'>
<LI><font face='Arial, Helvetica, sans-serif' size='2'>amount received from
directors or relative of the director of a NBFC;</font></LI>
<p></P>
<P ALIGN='JUSTIFY'>
<LI><font face='Arial, Helvetica, sans-serif' size='2'>amount raised by issue
of bonds or debentures secured by mortgage of any immovable property or other
asset of the company subject to conditions;</font></LI>
<p></P>
<P ALIGN='JUSTIFY'>
<LI><font face='Arial, Helvetica, sans-serif' size='2'>the amount brought in
by the promoters by way of unsecured loan;</font></LI>
<p></P>
<P ALIGN='JUSTIFY'>
<LI><font face='Arial, Helvetica, sans-serif' size='2'>amount received from
a mutual fund;</font></LI>
<p></P>
<P ALIGN='JUSTIFY'>
<LI><font face='Arial, Helvetica, sans-serif' size='2'>any amount received as
hybrid debt or subordinated debt;</font></LI>
<p></P>
<P ALIGN='JUSTIFY'>
<LI><font face='Arial, Helvetica, sans-serif' size='2'>any amount received by
issuance of Commercial Paper.</font></LI>
<p></P>
</UL>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Thus, the
directions have sought to exclude from the definition of public deposit amount
raised from certain set of informed lenders who can make independent decision.
</font></P>
<B>
<P ALIGN='JUSTIFY'></P>
</B>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
11. Are Secured debentures treated as Public Deposit? If not who regulates them?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
11. Debentures secured by the mortgage of any immovable property or other asset
of the company if the amount raised does not exceed the market value of the
said immovable property or other asset are excluded from the definition of ’Public
Deposit’ in terms of Non-Banking Financial Companies Acceptance of Public Deposits
(Reserve Bank) Directions, 1998. Secured debentures are debt instruments and
are regulated by Securities & Exchange Board of India.</font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
12. Whether NBFCs can accept deposits from NRIs?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
12. Effective from April 24, 2004, NBFCs cannot accept deposits from NRI except
deposits by debit to NRO account of NRI provided such amount do not represent
inward remittance or transfer from NRE/FCNR (B) account. However, the existing
NRI deposits can be renewed. </font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
13. Is nomination facility available to the Depositors of NBFCs?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
13. Yes, nomination facility is available to the depositors of NBFCs. The Rules
for nomination facility are provided for in section 45QB of the Reserve Bank
of India Act, 1934. Non-Banking Financial Companies have been advised to adopt
the Banking Companies (Nomination) Rules, 1985 made under Section 45ZA of the
Banking Regulation Act, 1949. Accordingly, depositor/s of NBFCs are permitted
to nominate, one person to whom, the NBFC can return the deposit in the event
of the death of the depositor/s. NBFCs are advised to accept nominations made
by the depositors in the form similar to one specified under the said rules,
viz Form DA 1 for the purpose of nomination, and Form DA2 and DA3 for cancellation
of nomination and variation of nomination respectively. </font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>14.
What else should a depositor bear in mind while depositing money with NBFCs?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
14. While making deposits with a NBFC, the following aspects should be borne
in mind:</font></P>
</FONT>
<P ALIGN='JUSTIFY'> <font face='Arial, Helvetica, sans-serif' size='2'>(i) Public
deposits are unsecured. </font> <br>
<font face='Arial, Helvetica, sans-serif' size='2'>(ii) A proper deposit receipt
which should, besides the name of the depositor/s state the date of deposit,
the amount in words and figures, rate of interest payable and the date of maturity
should be insisted. The receipt shall be duly signed by an officer authorised
by the company in that behalf.<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>(iii) The Reserve
Bank of India does not accept any responsibility or guarantee about the present
position as to the financial soundness of the company or for the correctness
of any of the statements or representations made or opinions expressed by the
company and for repayment of deposits/discharge of the liabilities by the company.</font><br>
<br>
<FONT FACE='Tahoma'> </font><FONT FACE='Tahoma'> </font>
<FONT FACE='Tahoma'>
<p></P>
</font> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'> </P>
</font> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
15. It is said that rating of NBFCs is necessary before it accepts deposit?
Is it true? Who rates them?</font></P>
<B>
<P ALIGN='JUSTIFY'></P>
</B>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
15. An unrated NBFC, except certain Asset Finance companies (AFC), cannot accept
public deposits. An exception is made in case of unrated AFC companies with
CRAR of 15% which can accept public deposit up to 1.5 times of the NOF or Rs
10 crore whichever is lower without having a credit rating. A NBFC may get itself
rated by any of the four rating agencies namely, CRISIL, CARE, ICRA and FITCH
Ratings India Pvt. Ltd. </font></P>
<P ALIGN='JUSTIFY'></P>
<B> </B>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
16. What are the symbols of minimum investment grade rating of different companies?
</font></P>
<B>
<P ALIGN='JUSTIFY'></P>
</B>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
16. The symbols of minimum investment grade rating of the Credit rating agencies
are: </font></P>
<P ALIGN='JUSTIFY'></P>
</FONT>
<TABLE BORDER CELLSPACING=1 CELLPADDING=2 align='center' bordercolor='#000000'>
<TR>
<TD VALIGN='TOP'> <B><FONT FACE='Arial'>
<P ALIGN='CENTER'><font face='Arial, Helvetica, sans-serif' size='2'>Name
of rating agencies</font>
</font></B></TD>
<TD VALIGN='TOP'> <B><FONT FACE='Arial'>
<P ALIGN='CENTER'><font face='Arial, Helvetica, sans-serif' size='2'>Level
of minimum investment<BR>
grade credit rating (MIGR)</font>
</font></b>
</TD>
</TR>
<TR>
<TD VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>CRISIL</font>
</font>

</TD>
<TD VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>FA-
(FA MINUS)</font>
</font>

</TD>
</TR>
<TR>
<TD VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>ICRA</font>
</font>

</TD>
<TD VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>MA-
(MA MINUS)</font>
</font>

</TD>
</TR>
<TR>
<TD VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>CARE</font>
</font>

</TD>
<TD VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>CARE
BBB (FD)</font>
</font>

</TD>
</TR>
<TR>
<TD VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>FITCH
Ratings India Pvt. Ltd.</font>
</font>

</TD>
<TD VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>tA-(ind)(FD)</font>
</font>

</TD>
</TR>
</TABLE>
<br>
<FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>It may be
added that A- is not equivalent to A, AA- is not equivalent to AA and AAA- is
not equivalent to AAA.</font></P>

<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
17. Can a NBFC which is yet to be rated accept public deposit?</font></P>
<B>
<P ALIGN='JUSTIFY'></P>
</b>
<P ALIGN='JUSTIFY'> <font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
17. No, a NBFC cannot accept deposit without rating except an EL/HP company
complying with prudential norms and having CRAR of 15%, though not rated, may
accept public deposit up to 1.5 times of NOF or Rs. 10 crore whichever is less.
</font></P>
<B>
<P ALIGN='JUSTIFY'></P>
</B>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
18. When a company’s rating is downgraded, does it have to bring down its level
of public deposits immediately or over a period of time?</font></P>
<B>
<P ALIGN='JUSTIFY'></P>
</B>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
18. If rating of a NBFC is downgraded to below minimum investment grade rating,
it has to stop accepting public deposit, report the position within fifteen
working days to the RBI and reduce within three years from the date of such
downgrading of credit rating, the amount of excess public deposit to nil or
to the appropriate extent permissible under paragraph 4(4) of Non-Banking Financial
Companies Acceptance of Public Deposits ( Reserve Bank) Directions, 1998; however
such NBFC can renew the matured public deposits subject to repayment stipulations
specified above and compliance with other conditions for acceptance of deposits.</font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
19. In case a NBFC defaults in repayment of deposit what course of action can
be taken by depositors?</font></P>
<B>
<P ALIGN='JUSTIFY'></P>
</B>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
19. If a NBFC defaults in repayment of deposit, the depositor can approach Company
Law Board or Consumer Forum or file a civil suit to recover the deposits.</font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
20. What is the role of Company Law Board in protecting the interest of depositors?
How one can approach it?</font></P>
<B>
<P ALIGN='JUSTIFY'></P>
</B>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
20. Where a non-banking financial company fails to repay any deposit or part
thereof in accordance with the terms and conditions of such deposit, the Company
Law Board (CLB) either on its own motion or on an application from the depositor
directs, by order, the non-banking financial company to make repayment of such
deposit or part thereof forthwith or within such time and subject to such conditions
as may be specified in the order. </font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>As explained
above the depositor can approach CLB by mailing an application in prescribed
form to the appropriate bench of the Company Law Board according to its territorial
jurisdiction with the prescribed fee.</font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES
</b>21. Can you give the addresses of the various benches of the Company Law
Board (CLB) indicating their respective jurisdiction?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
21. The details of addresses and territorial jurisdiction of the bench officers
of CLB are as under:</font></P>
</FONT>
<TABLE BORDER CELLSPACING=1 CELLPADDING=2 align='center' bordercolor='#000000'>
<TR>
<TD VALIGN='TOP'> <B><FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Sr.
No.</font>
</font></B></TD>
<TD VALIGN='TOP'> <B><FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Addresses</font>
</font></B></TD>
<TD VALIGN='TOP'> <B><FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'> Territorial
Jurisdiction</font>
</font></B></TD>
</TR>
<TR>
<TD height='84' VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>1.</font>
</FONT></TD>
<TD height='84' VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Bench
Officer, Company Law Board,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>Northern Region
Bench,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>Shastri Bhavan,
’A’ Wing, 5<SUP>th</SUP> Floor,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>Dr. Rajendra
Prasad Road,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>New Delhi 110
001.</font></P>
</FONT></TD>
<TD height='84' VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Uttar
Pradesh, Jammu & Kashmir, <br>
Punjab, Himachal Pradesh, <br>
Rajasthan, Haryana and Union <br>
Territories of Chandigarh and Delhi</font>
</FONT></TD>
</TR>
<TR>
<TD height='86' VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>2.</font>
</FONT></TD>
<TD height='86' VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Bench
Officer, Company Law Board,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>Southern Region
Bench,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>Shastri Bhavan,
’A’ Wing, 5<SUP>th</SUP> Floor,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>Block 8, No
26, Haddows Road,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>Chennai 600
006.</font></P>
</FONT></TD>
<TD height='86' VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Tamil
Nadu, Andhra Pradesh, <br>
Kerala, Karnataka, Union <br>
Territories of Amindivi, <br>
Minicoy and Lakshadweep Islands <br>
and Pondicherry</font>
</FONT></TD>
</TR>
<TR>
<TD height='101' VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>3.</font>
</FONT></TD>
<TD height='101' VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Bench
Officer, Company Law Board,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>Western Region
Bench,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>2<SUP>nd</SUP>
Floor, N.T.C. House,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>15, Narottam
Morarjee Marg,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>Ballard Estate,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>Mumbai-400 038.</font></P>
</FONT></TD>
<TD height='101' VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Maharashtra,
Gujarat, Madhya <br>
Pradesh, Goa and Union <br>
Territories of Dadra & Nagar <br>
Haveli, Daman and Diu.</font>
</FONT></TD>
</TR>
<TR>
<TD height='98' VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>4.</font>
</FONT></TD>
<TD height='98' VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Bench
Officer, Company Law Board,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>Eastern Region
Bench,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>9, Old Post
Office Street,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>6<SUP>th</SUP>
Floor,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>Kolkata 700
001.</font></P>
</FONT></TD>
<TD height='98' VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>West
Bengal, Orissa, Bihar, <br>
Assam, Tripura, Manipur, <br>
Nagaland, Meghalaya, Arunachal <br>
Pradesh, Mizoram, Union <br>
Territories of Andaman and <br>
Nicobar Islands.</font>
</FONT></TD>
</TR>
<TR>
<TD VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>5.</font>
</FONT></TD>
<TD VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Bench
Officer, Company Law Board,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>Principal Bench
at New Delhi, Shastri <br>
Bhavan, ’A’ Wing, 5<SUP>th</SUP> Floor,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>Dr. Rajendra
Prasad Road,<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>New Delhi 110
001.</font></P>
</FONT></TD>
<TD VALIGN='TOP'> <FONT FACE='Arial'>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>All
Principal Bench matters all over <br>
India.</font>
</FONT></TD>
</TR>
</TABLE>
<br>
<FONT FACE='Arial'>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
22. We hear that in a number of cases official liquidators have been appointed
on the defaulting NBFCs. What is their role and how one can approach them?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
22. Official Liquidator is appointed by the court after giving the company reasonable
opportunity of being heard in a winding up petition. The liquidator performs
duties of winding up and such duties in reference thereto as the court may impose.
</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Where the
court has appointed an official liquidator or provisional liquidator, he becomes
custodian of the property of the company and runs the day-to-day affairs of
the company. He has to draw up a statement of affairs of the company in prescribed
form containing particulars of assets of the company, its debts and liabilities,
names/residences/occupations of its creditors, the debts due to the company
and such other information as may be prescribed. The scheme is drawn up by the
liquidator and same is put up to the court for approval. The liquidator realizes
the assets of the company and arranges to repay the creditors according to the
scheme approved by the court. The liquidator generally inserts advertisement
in the newspaper inviting claims from depositors/investors in compliance with
court orders. Therefore, the investors/depositors should file the claims within
due time as per such notices of the liquidator. The Reserve Bank also provides
assistance to the depositors in furnishing addresses of the official liquidator.</font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
23. Consumer Court play useful role in attending to depositors problems. Can
one approach Consumer Forum, Civil Court, CLB simultaneously?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
23. Yes, a depositor can approach any or all of the redressal authorities i.e
consumer forum, court or CLB.</font></P>
<B> </B>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
24. Is there an Ombudsman for hearing complaints against NBFCs?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
24. No, there is no Ombudsman for hearing complaints against NBFCs. </font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
25. What are various prudential regulations applicable to NBFCs? </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
25. The Bank has issued detailed directions on prudential norms, vide Non-Banking
Financial Companies Prudential Norms (Reserve Bank) Directions, 1998. The directions
interalia, prescribe guidelines on income recognition, asset classification
and provisioning requirements applicable to NBFCs, exposure norms, constitution
of audit committee, disclosures in the balance sheet, requirement of capital
adequacy, restrictions on investments in land and building and unquoted shares.
</font> </P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
26. Please explain the terms ’owned fund’ and ’net owned fund’ in relation to
NBFCs?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
26. ’Owned Fund’ means aggregate of the paid-up equity capital and free reserves
as disclosed in the latest balance sheet of the company after deducting therefrom
accumulated balance of loss, deferred revenue expenditure and other intangible
assets.</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'> The amount
of investments of such company in shares of its subsidiaries, companies in the
same group and all other NBFCs and the book value of debentures, bonds, outstanding
loans and advances made to and deposits with subsidiaries and companies in the
same group is arrived at. The amount thus calculated, to the extent it exceeds
10% of the owned fund, is reduced from the amount of owned fund to arrive at
’Net Owned Fund’.</font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
27. What are the responsibilities of the NBFCs accepting/holding public deposits
with regard to submission of Returns and other information to RBI? </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
27. The NBFCs accepting public deposits should furnish to RBI </font></P>
<P ALIGN='JUSTIFY'> <font face='Arial, Helvetica, sans-serif' size='2'>i. Audited
balance sheet of each financial year and an audited profit and loss account
in respect of that year as passed in the general meeting together with a copy
of the report of the Board of Directors and a copy of the report and the notes
on accounts furnished by its Auditors; </font> <br>
<font face='Arial, Helvetica, sans-serif' size='2'>ii. Statutory Annual Return
on deposits - NBS 1;<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>iii. Certificate from
the Auditors that the company is in a position to repay the deposits as and
when the claims arise;<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>iv. Quarterly Return
on liquid assets;<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>v. Half-yearly Return
on prudential norms;<br>
</font><font face='Arial, Helvetica, sans-serif' size='2'>vii. Half-yearly ALM
Returns by companies having public deposits of Rs. 20 crore and above or with
assets of Rs. 100 crore and above irrespective of the size of deposits ;</font>
<br>
<font face='Arial, Helvetica, sans-serif' size='2'>viii. Monthly return on exposure
to capital market by companies having public deposits of Rs. 50 crore and above;
and </font> <br>
<font face='Arial, Helvetica, sans-serif' size='2'>ix. A copy of the Credit
Rating obtained once a year along with one of the Half-yearly Returns on prudential
norms as at (v) above. </font>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
28. What are the documents or the compliance required to be submitted to the
Reserve Bank of India by the NBFCs not accepting/holding public deposits? </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
28. The NBFCs having assets size of Rs. 100 crore and above but not accepting
public deposits are required to submit a Monthly Return on important financial
parameters of the company. All companies not accepting public deposits have
to pass a board resolution to the effect that they have neither accepted public
deposit nor would accept any public deposit during the year. </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>However,
all the NBFCs (other than those exempted) are required to be registered with
RBI and also make sure that they continue to be eligible to remain Registered.
Further, all NBFCs (including non-deposit taking) should submit a certificate
from their Statutory Auditors every year to the effect that they continue to
undertake the business of NBFI requiring holding of CoR under Section 45-IA
of the RBI Act, 1934. </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>RBI has
powers to cause Inspection of the books of any company and call for any other
information about its business activities. For this purpose, the NBFC is required
to furnish the information in respect of <U>any change</U> in the composition
of its Board of Directors, address of the company and its Directors and the
name/s and official designations of its principal officers and the name and
office address of its Auditors. With effect from April 1, 2007 non-deposit taking
NBFCs with assets size of Rs 100 crore and above have been advised to maintain
minimum CRAR of 10% and shall also be subject to single/group exposure norms.</font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
29. The NBFCs have been made liable to pay interest on the overdue matured deposits
if the company has not been able to repay the matured public deposits on receipt
of a claim from the depositor. Please elaborate the provisions. </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
29. As per Reserve Bank’s Directions, overdue interest is payable to the depositors
in case the company has delayed the repayment of matured deposits, and such
interest is payable from the date of receipt of such claim by the company or
the date of maturity of the deposit whichever is later, till the date of actual
payment. If the depositor has lodged his claim after the date of maturity, the
company would be liable to pay interest for the period from the date of claim
till the date of repayment. For the period between the date of maturity and
the date of claim it is the discretion of the company to pay interest. </font></P>
<B>
<P ALIGN='JUSTIFY'></P>
</B>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
30. Can a company pre-pay its public deposits? </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
30. A NBFC accepts deposits under a mutual contract with its depositors. In
case a depositor requests for pre-mature payment, Reserve Bank of India has
prescribed Regulations for such an eventuality in the Non-Banking Financial
Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 wherein
it is specified that NBFCs cannot grant any loan against a public deposit or
make premature repayment of a public deposit within a period of three months
(lock-in period) from the date of its acceptance, however in the event of death
of a depositor, the company may, even within the lock - in period, repay the
deposit at the request of the joint holders with survivor clause / nominee /
legal heir only against submission of relevant proof, to the satisfaction of
the company. </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>An NBFC
subject to above provisions, if it is <U>not </U>a problem company, may permit
after the lock–in period premature repayment of a public deposit at its sole
discretion, at the rate of interest prescribed by the Bank. </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>A problem
NBFC is prohibited from making premature repayment of any deposits or granting
any loan against public deposits/deposits, as the case may be. The prohibition
shall <U>not</U>, however, apply in the case of death of depositor <U>or</U>
repayment of tiny deposits i.e. up to Rs. 10000/- subject to lock in period
of 3 months in the latter case.</font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
31. What is the liquid asset requirement for the deposit taking companies? Where
these assets are kept? Does Depositors have any claims on them?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
31. In terms of Section 45-IB of the RBI Act, 1934 the minimum level of liquid
asset to be maintained by NBFCs is 15 per cent of public deposits outstanding
as on the last working day of the second preceding quarter. Of the 15%, NBFCs
are required to invest not less than ten percent in approved securities and
the remaining 5% can be in unencumbered term deposits with any scheduled commercial
bank. Thus, the liquid assets may consist of Government securities, Government
guaranteed bonds and term deposits with any scheduled commercial bank. </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>The investment
in Government securities should be in dematerialised form which can be maintained
in Constituents’ Subsidiary General Ledger (CSGL) Account with a scheduled commercial
bank (SCB) / Stock Holding Corporation of India Limited (SHICL). In case of
Government guaranteed bonds the same may be kept in dematerialised form with
SCB/SHCIL or in a dematerialised account with depositories [National Securities
Depository Ltd. (NSDL)/Central Depository Services (India) Ltd. (CDSL)] through
a depository participant registered with Securities & Exchange Board of
India (SEBI). However in case there are Government bonds which are in physical
form the same may be kept in safe custody of SCB/SHCIL. </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>NBFCs have
been directed to maintain the mandated liquid asset securities in a dematerialised
form with the entities stated above at a place where the registered office of
the company is situated. However, if a NBFC intends to entrust the securities
at a place other than the place at which its registered office is located, it
may do so after obtaining in writing the permission of RBI. It may be noted
that the liquid assets in approved securities will have to be maintained in
<U>dematerialised</U> form only. </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>The liquid
assets maintained as above are to be utilised for payment of claims of depositors.
However, deposit being unsecured in nature depositors do not have direct claim
on liquid assets. </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
32. Please tell us something about the companies which are NBFCs, but are exempted
from registration? </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
32. Housing Finance Companies, Merchant Banking Companies, Stock Exchanges,
Companies engaged in the business of stock-broking/sub-broking, Venture Capital
Fund Companies, Nidhi Companies, Insurance companies and Chit Fund Companies
are NBFCs but they have been exempted from the requirement of registration under
Section 45-IA of the RBI Act, 1934 subject to certain conditions.</font></P>
<P ALIGN='JUSTIFY'> </P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>Housing
Finance Companies are regulated by National Housing Bank, Merchant Banker/Venture
Capital Fund Company/stock-exchanges/stock brokers/sub-brokers are regulated
by Securities and Exchange Board of India, Insurance companies are regulated
by Insurance Regulatory and Development Authority. Similarly, Chit Companies
are regulated by the respective State Governments and Nidhi Companies are regulated
by Ministry of Company Affairs, Government of India. </font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
33. There are some entities (not companies) which carry on activities like that
of NBFCs. Are they allowed to take deposit? Who regulates them?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
33. Any person who is an individual or a firm or unincorporated association
of individual cannot accept deposit except by way of loan from relatives, if
his/its business wholly or partly includes business that of loan, investment,
hire-purchase or leasing company or principal business is that of receiving
of deposits under any scheme or arrangement or in any manner or lending in any
manner.</font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
34. What is a Residuary Non-Banking Company (RNBC)? In what way it is different
from other NBFCs? </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
34. Residuary Non-Banking Company is a class of NBFC which is a company and
has as its principal business the receiving of deposits, under any scheme or
arrangement or in any other manner and not being Investment, Asset Financing,
Loan Company. These companies are required to maintain investments as per directions
of RBI, in addition to liquid assets. The functioning of these companies is
different from those of NBFCs in terms of method of mobilisation of deposits
and requirement of deployment of depositors' funds. However, Prudential Norms
Directions are applicable to these companies also.</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
35. We understand that there is no ceiling on raising of deposits by RNBCs,
then how safe is deposit with them?</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
35. It is true that there is no ceiling on raising of deposits by RNBCs but
every RNBC has to ensure that the amounts deposited and investments made by
the company are not less that the aggregate amount of liabilities to the depositors.
</font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'>To secure
the interest of depositor, such companies are required to invest in a portfolio
comprising of highly liquid and secured instruments viz. Central/State Government
securities, fixed deposit of scheduled commercial banks (SCB), Certificate of
deposits of SCB/FIs, units of Mutual Funds, etc. </font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
36. Can RNBC forfeit deposit if deposit installments are not paid regularly
or discontinued? </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
36. No Residuary Non-Banking Company shall forfeit any amount deposited by depositor,
or any interest, premium, bonus or other advantage accrued thereon.</font></P>
<P ALIGN='JUSTIFY'></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>QUES</b>
37. Please tell us something on rate of interest payable by RNBCs on deposits
and maturity period of deposits? </font></P>
<P ALIGN='JUSTIFY'><font face='Arial, Helvetica, sans-serif' size='2'><B>ANS</b>
37. The amount payable by way of interest, premium, bonus or other advantage,
by whatever name called by a residuary non-banking company in respect of deposits
received shall not be less than the amount calculated at the rate of 5% (to
be compounded annually) on the amount deposited in lump sum or at monthly or
longer intervals; and at the rate of 3.5% (to be compounded annually) on the
amount deposited under daily deposit scheme. Further, a RNBC can accept deposits
for a minimum period of 12 months and maximum period of 84 months from the date
of receipt of such deposit. They cannot accept deposits repayable on demand.
</font></P>
</FONT> </td> </tr></span>

</table>

 
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