Money & Banking

RBI to crack down on unauthorised NBFCs

Our Bureau Mumbai | Updated on March 12, 2018


Legal action to be initiated; tighter norms coming for NCD issues, gold loan firms

The Reserve Bank of India will get tough with companies which are accepting deposits from the public though they do not have the mandate to do so, a senior central bank official said.

A RBI survey has found that there are 96 companies that are accepting deposits without registering with the RBI.

“The approach of the RBI, till recently, towards such companies was slow and soft.

“We gave them enough hearing. Not anymore! We will initiate legal action against such companies,” said Archana Mangalagiri, General Manager, Department of Non-Banking Supervision, RBI.

‘Slow legal process’

She also said the country’s “extremely slow legal process,” is one of the main reasons why companies such as Speak Asia, Rose Valley and Saradha Group were emboldened to take deposits from the public. Although 12,230 non-banking financial companies are registered with the RBI, she said the regulator is only actively monitoring 236 deposit taking NBFCs and the systemically important ones.

“We do not have the resources to monitor the small NBFCs. We only go after them when we get specific intelligence inputs,” Mangalagiri said in an event organised by the Bombay Chartered Accountants Society (BCAS).

She said the RBI is trying to create public awareness through awareness campaigns.

NCD issue

Explaining why the RBI came out with the regulation to monitor non-convertible debenture (NCD) issues, she said, thousands of companies are accepting deposits under the garb of NCDs.

“It is happening continuously over-the-counter, 24 hours, 365 days a year. They don’t want to give any information with respect to the issue. They are issuing NCDs with no terms and conditions, no issue date and no maturity date,” she said.

Most of the times, illegally mobilised money (surrogate deposits) are being diverted to extremely risky assets such as real-estate, capital markets and proprietary firms of these companies’ promoters, she added.

The RBI is planning to come up with guidelines for raising NCDs by aligning regulations for NBFCs with the risk of their business activity.

Gold loan firms

Mangalagiri also said the RBI is concerned about the unprecedented growth of gold loan companies.

“We will come out with further regulations for gold loan companies,” she said.

The RBI survey has found that gold loan companies are not following laid down norms like the amount of loan that can be given against a particular quantity of gold.

“We are going to ensure that all the violations are suitably addressed and not softly addressed,” she said.



Published on September 11, 2013

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