Non-banking financial institutions (NBFIs), engaged in varied financial activities
are part of the Indian financial system providing a range of financial services.
NBFCs are incorporated under the Companies Act, 1956. NBFCs can be classified into
two broad categories, viz., (i) NBFCs accepting public deposit (NBFCs-D)
and (ii) NBFCs not accepting/holding public deposit (NBFCs-ND). Residuary Non-Banking
Companies(RNBCs) are another category of NBFCs whose principal business is acceptance
of deposits and investing in approved securities. In the interest of depositors,
RBI has evolved a regulatory framework the salient features of which are outlined
below for the guidance of depositors.. However, the investors must carefully
evaluate their investment decisions while investing in NBFCs, as the instructions
below are illustrative and not exhaustive,
- NBFCs include a loan company, an investment company, asset finance company ( i.e.
a company conducting the business of equipment leasing or hire purchase finance)
and Residuary Non-Banking Companies.
- An NBFC must be registered with the Reserve Bank of India (RBI) and have specific
authorization to accept deposits from the public.
- NBFC must display the Certificate of Registration or a certified copy thereof at
the Registered office and other offices/branches.
- Registration of an NBFC with the RBI merely authorizes it to conduct the business
of NBFC. RBI does notguarantee the repayment of deposits accepted
by NBFCs. NBFCs cannot use the name of the RBI in any manner while conducting
- The NBFC whose application for grant of Certificate of Registration (CoR) has been
rejected or cancelled by the RBI is neither authorized to accept fresh deposits
nor renew existing deposit. Such rejection or cancellation is also published in
newspapers from time to time . Besides, a list of NBFCs permitted to accept
public deposits, NBFCs whose applications for CoR has been rejected or whose
CoR has been cancelled by the RBI is available on the RBI's web site www.rbi.org.in( go to site map and then NBFC
- NBFCs which accept deposits should have minimum investment grade credit rating granted
by an approved credit rating agency for deposit collection, except certain Asset
Finance (equipment leasing and hire purchase finance) companies and Residuary Non-Banking
- NBFCs excluding RNBCs cannot
-Offer a rate of interest on deposits more than that approved by RBI from
time to time (at present 12.5%).
-Accept deposit for a period less than 12 months and more than 60 months
-Offer any gifts/incentives to solicit deposits from public.
- RNBCs should
-offer a rate of interest of not less than 5% per annum on term deposits
and 3.5% on daily deposits, both compounded annually, under extant directions.
-RNBCs cannot accept deposits for a period less than 12 months and more than 84
-RNBCs cannot offer any gifts/incentives to solicit deposits from public
- NBFCs including RNBCs can
-accept deposit only against issue of proper receipt.
-The receipt should bear the name of the company and should be signed by an authorized
official of the company.
-The receipt should mention the name of the depositor, the amount in words as well
as figures, the rate of interest payable on the deposit amount and the date of repayment
of matured deposit along with the maturity amount.
- In the case of brokers/agents etc collecting public deposits on behalf of NBFCs,
the depositors should satisfy themselves that the brokers/agents are duly authorized
by the NBFC.
- If a deposit taking NBFC fails to repay the deposit or the interest accrued thereon
in accordance with the terms and conditions of acceptance of such deposit, redressal
of grievance can be through,
-the Regional Bench of the Company Law Board at Chennai/Delhi/Kolkata/Mumbai
- Acceptance of deposits by companies engaged in activities including plantation
activities, commodities trading, multilevel marketing, manufacturing activities,
housing finance, nidhis (mutual benefit financial companies), and potential nidhis
(mutual benefit company) and companies engaged in collective investment schemes
do not come under the purview/regulations of the RBI.
- Individuals, firms and other unincorporated association of individuals
or bodies shall not accept deposits from the public–
(i) if his or its business wholly or partly includes any of the financial
activities such as loans and advances, acquisition of shares or marketable securities,
leasing or hire purchase activities , or
(ii) if his or its principal business is that of receiving deposits or lending in any manner.