THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI NAMO NARAIN MEENA)
(a)&(b): Reserve Bank of India (RBI) has informed that certain instances of non-payment of
deposit by some NBFCs have come to the notice of RBI. In case of non-payment of deposits by
any company, the deposit holder can approach the Company Law Board (CLB) for redressal of
grievance. In case of non-compliance of an order of repayment issued by the CLB, criminal
complaints are filed against the company and its Directors under the provisions of the Reserve
Bank of India Act, 1934. Further, RBI has also reported that whenever a company including
the Chit Fund / NBFC is declared as vanished after accepting the deposits from the public,
the matter is referred to the Economic Offences Wing of the concerned State Government to
investigate the case and take legal action including penal action as per the Indian Penal
Code / Criminal Procedure Code, as deemed appropriate. RBI has declared such companies as
vanished companies and has placed the list of such companies on its website. Till August
2011, RBI declared 1,554 NBFCs as vanished. Further, In Civil Writ Petition (CWP) No.
11094/2011 and CWP No. 14795/2011 the Hon`ble High Court of Punjab and Haryana had directed
freezing the accounts of some Online / (Multi level Marketing) MLM companies. The Department
of Information and Technology, Government of India informed that the website of these companies
have been blocked. RBI has also informed that the accounts of these companies have been
frozen by the concerned Indian banks.
# RBI has reported that no NBFC can commence business without obtaining a Certificate of
registration (CoR) under the RBI Act, 1934. Contravention of these provisions attracts penalties.
RBI has reported that it has taken appropriate action against illegal entities / companies
whenever information of the same has been received by it. During the last three years
(April, 2008 to July, 2011) RBI has issued CoR to 264 Non-Deposit taking NBFCs, which had
already commenced Non-Banking Finance Institution (NBFI) activities without actually registering.
But they have become compliant subsequently. The year-wise break-up is given below:
2008-09 112
2009-10 93
2010-11 52
April to July 2011 07
Total 264
All the above companies are non-deposit taking companies
In order to protect the interest of depositors, the steps taken by the Government/RBI include :
i) Directions have been issued by RBI to NBFCs under Non-Banking Financial Companies
Acceptance of Public Deposits (Reserve Bank) Directions 1998 on acceptance of deposits
and prudential norms have been laid down.
ii) RBI initiates adverse action against errant NBFCs for various defaults and contraventions
of provisions of Reserve Bank of India Act, 1934, such as issuing orders prohibiting them
from accepting further deposits, and alienation of assets. Action taken also involves filing
winding up petitions, launching criminal proceedings against such companies and their management.
iii) RBI also files complaints with the Economic Offences Wing of State Police Authorities to
curb unauthorized acceptance of public deposits. In several cases, the Courts have appointed
provisional liquidators and have also restrained NBFCs from disposing of their assets in any
manner.
iv) Market intelligence system has been strengthened for picking early warning signals about
the health of particular NBFC and to trigger supervisory action.
v) At the instance of RBI, some State Governments have enacted legislations to protect the
interest of depositors` in financial establishments.
vi) The close co-ordination through institutionalized framework of State Level Co-ordination
Committee (SLCC) with the State Government and other regulatory bodies has also
resulted in greater/ improved monitoring and restriction of unauthorized acceptance of
deposits by NBFCs and Unincorporated Bodies (UIBs).
(c)&(d): On pursuance by the RBI, 14 States and 1 Union Territory have enacted legislation
on the lines of Tamil Nadu Protection of Interest of Depositors (in Financial Establishments)
Act, 1997, which contains stiff penal provisions for promoters of financial establishments
defaulting in repayment of deposits and interest. The close co-ordination through
institutionalized framework of State Level Co¬ordination Committee (SLCC) with the State
Government and other Regulatory bodies have resulted in greater / improved monitoring and
restriction of unauthorized acceptance of deposits by NBFCs and UIBs.
