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Our Bureau

New Delhi , Dec. 1

The Reserve Bank of India (RBI) has asked Margadarsi Financiers, a Hyderabad-based Hindu Undivided Family (HUF), not to accept fresh deposits or renew matured deposits.

The unincorporated body has also been advised to put in place a mechanism to monitor the assets of the HUF so that they are not eroded and thereby compromising its capacity to discharge obligations to the depositors.

Moreover, the HUF has been asked to pay deposits as and when they mature and that any violation could attract attention under the provisions of the Andhra Pradesh Protection of Depositors of Financial Establishments Act 1999.

This advice has come in the wake of some complaints received against Margadarsi Financiers. It was alleged that the HUF had raised a huge sum as deposits from the public as on March 31, 2006 and had reported huge accumulated losses.

It was alleged that the company was engaged in business of non-banking financial activities and thereby infringing Section 45S of the RBI Act 1934, which prohibits partnerships firms or any unincorporated body of individuals from accepting any deposits from the public unless it is from relatives.

An official release said that the complaints were referred to RBI. The central bank held discussions with the representatives of the unincorporated body. Margadarsi Financiers has informed the RBI that it has discontinued acceptance of deposits including renewal with effect from September 16, 2006.

Moreover, the HUF has said that matured deposits are being paid as per schedule. It has also agreed to deposit an equivalent amount of unclaimed deposits in an escrow account on the due date and utilise the disinvestment proceeds to match the depositors' liability, which are consistent with the three element approach.

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