The Hindu Business Line : Has Sahara India Fin obtained stay on ban?

Confusing signals
A news agency report said the Lucknow Bench of the Allahabad High Court has granted a stay against the RBI ban
The company did not officially confirm it
RBI says no further information to share

Our Bureau

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Mumbai, June 5 Depositors of the Sahara India Financial Corporation are worried and confused about the fate of their money. On Wednesday, the Reserve Bank of India had banned SIFCL from taking fresh deposits or renewing the existing deposits following violation of regulatory norms. The RBI had also said that the company should repay depositors on maturity.

However, on Thursday there were reports that the company has obtained a Court stay on the ban.

A news agency report said that the Lucknow Bench of the Allahabad High Court has granted a stay against the RBI ban. Although such a development would have been in favour of the company, SIFCL would not officially confirm it.

A Sahara official said they cannot make a statement as the matter is sub-judice. “We were advised against making any comment,” said a spokesperson of the company.

An RBI official said the regulator has no further information to share.

With the company approaching the Court, depositors are not sure what the fate of their investments with the company would be.

News agency reports also said that the Uttar Pradesh Government had written to the RBI, seeking an explanation on the steps taken to protect depositors’ interests.

Sahara has a deposit base of nearly Rs 18,000 crore with a depositor base of 4.25 crore. A statement issued by SIFCL late Wednesday said that the company had asked for more time to comply with the regulations, but that the RBI had not given due consideration to its demand.

A non-banking finance company analyst said, “Earlier, the central bank had warned SIFCL and Peerless, the other large residuary NBFC, about the fact that their investments were not in line with regulatory norms. While Peerless gave an undertaking to the RBI that they would follow the norms, SIFCL had not done so.”

An analyst from a private broking firm who tracks the NBFC sector said, the RBI’s move is more to do with issues that are specific to SIFCL, such as violation of investment norms. There were also worries of unaccounted money flowing through the company, as it was found to be flouting Know Your Customer norms.

“In the case of SIFCL, there is lot of ambiguity about where the money is flowing in from, where it is being deployed or who the customers are,” said the analyst.

Mr Mahesh Thakkar, Director-General, Finance Industry Development Council said, “Hopefully, this move will not lead to a run on public deposits and RBI will not ban other well placed NBFCs.”

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