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C.R. Sukumar

The Department is now taking careful steps to fix the promoters and directors of those NBFCs that failed to comply with the repayment schedules ordered by the Company Law Boards of different regions.

A LONG WAIT: Depositors lined up at the main headquarters of Maratha Mandir Co-op Bank in South Mumbai to withdraw their money after hearing the news that the bank is in trouble. — Paul Noronha

Hyderabad , Aug. 14

LAKHS of small depositors across the country, who had lost over Rs 10,000 crore in non-banking finance companies (NBFCs) that had downed shutters during last decade, can now expect some solace with the Department of Company Affairs (DCA) deciding to `deal seriously' with the errant promoters and directors of the defaulting NBFCs.

The move has apparently resulted from the pressures put in by various political parties on the Government in view of the recent collapse of some of the scheduled commercial banks and cooperative banks such as Global Trust Bank and South Indian Cooperative Bank.

Interestingly, the DCA's move comes close on the heels of the Reserve Bank of India suspending the licences of over 100 nidhi companies last week.

Confirming the move on NBFCs, a senior DCA official told Business Line that "Though the RBI Act was amended in 1997 providing for a comprehensive regulatory framework for NBFCs after certain disquieting developments in the NBFC sector, a large number of NBFCs by then suffered serious funds mismatch leaving a major blow to the small depositors."

Admitting that a good number of these errant NBFCs had taken shelter in the safe heaven of schemes framed by the Company Law Board (CLB) much to the chagrin of the poor depositors, the DCA official said that the Department was now taking careful steps to fix the promoters and directors of those NBFCs that failed to comply with the repayment schedules ordered by the CLBs of different regions.

While expediting the prosecution measures against errant promoters and directors in the economic offences courts of various States, the DCA is planning to order `full-fledged inspection' of books of these NBFCs with the powers conferred under Section 209A of the Companies Act, the official said.

Stating that the inspection of books of NBFCs on the charges of mismatch of funds, non-recovery of loans and non-payment of depositors' money would be completed in three to four months time, he said the Department expected to lay its hands on discrepancies in the accounts and clues on siphoning off funds by the promoters and directors. "In such an event, we will refer the cases to the Serious Frauds Inspection Office and recommend a thorough investigation and criminal prosecution of directors and promoters of errant NBFCs," the DCA official said.

More Stories on : NBFCs | Economic Offences | Regulatory Bodies & Rulings

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