Companies registered with MCA but not required to be registered with the Reserve Bank as NBFCs are not under the regulatory domain of the Reserve Bank. Whenever Reserve Bank receives any such complaints about the companies registered with MCA but not registered with the Reserve Bank as NBFCs, it forwards the complaints to the Registrar of Companies (RoC) of the respective state for any action. The complainants are advised that the complaints relating to irregularities of such companies should be promptly lodged with RoC concerned for initiating corrective action. However, in case it comes to the knowledge of the Reserve Bank that those companies were required to be registered with the Reserve Bank but have not done so and have accepted deposits as defined under RBI Act, such action, as is deemed necessary under the provisions of the RBI Act, will be taken.

A While making deposits with an NBFC the following aspects should also be borne in mind. Note that all public deposits are unsecured. Insist on a proper deposit receipt which should, besides the name of the depositor/s state the date of deposit, the amount in words and figures, rate of interest payable and the date of maturity. Amounts taken under any other nomenclature may not be treated as public deposits and may not be governed by RBI regulations.

As per Reserve Bank’s Directions, overdue interest is payable to the depositors in case the NBFC has delayed the repayment of matured deposits, and such interest is payable from the date of receipt of such claim by the NBFC or the date of maturity of the deposit whichever is later, till the date of actual payment. If the depositor has lodged his claim after the date of maturity, the NBFC would be liable to pay interest for the period from the date of claim till the date of repayment. For the period between the date of maturity and the date of claim it is the discretion of the company to pay interest.

In cases where NBFCs are required to freeze the term deposits of customer based on the orders of the Government authorities or the deposit receipts are seized by the Government authorities, they shall follow the procedure as given below:

i. A request letter may be obtained from the depositor on maturity. While obtaining the request letter from the depositor for renewal, NBFCs should also advise him to indicate the term for which the deposit is to be renewed. In case the depositor does not exercise his option of choosing the term for renewal, NBFCs may renew the same for a term equal to the original term.

ii. No new receipt is required to be issued. However, suitable note may be made regarding renewal in the deposit ledger.

iii.  Renewal of deposit may be advised by registered letter / speed post / courier service to the concerned Government department under advice to the depositor. In the advice to the depositor, the rate of interest at which the deposit is renewed should also be mentioned.

iv. If overdue period does not exceed 14 days on the date of receipt of the request letter, renewal may be done from the date of maturity. If it exceeds 14 days, NBFCs may pay interest for the overdue period as per the policy adopted by them, and keep it in a separate interest free sub-account which should be released when the original fixed deposit is released.

However, the final repayment of the principal and the interest so accrued should be done only after the clearance regarding the same is obtained by the NBFCs from the respective Government agencies.

A. The deposit acceptance activities of the class of NBFCs, popularly known as RNBCs, are governed by the provisions of Residuary Non- Banking Companies (Reserve Bank) Directions, 1987. That the functioning of these companies (which are very few in number) is entirely different from those of the NBFCs in terms of method of mobilisation of deposits and requirement of deployment of depositors’ funds. These companies are required to invest not less than 80 per cent of their aggregate deposit liabilities according to the prescribed investment pattern. Only 20 per cent of the deposits or ten times the NOF, whichever is lower, can be deployed in other assets. These companies are characterised by poor NOF and as such they are obliged to invest the entire deposit funds as directed by RBI. Serious action has been taken against the erring RNBCs and more than 200 such companies have so far been prohibited from acceptance of deposits.

An NBFC accepts deposits under a mutual contract with its depositors. In case a depositor requests for pre-mature payment, the Reserve Bank has prescribed regulations for such an eventuality in the Master Direction - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 (as amended from time to time) wherein it is specified that NBFCs cannot grant any loan against a public deposit or make premature repayment of a public deposit within a period of three months (lock-in period) from the date of its acceptance. However, in the event of death of a depositor, the NBFC may, even within the lock-in period, repay the deposit at the request of the joint holders with survivor clause, or to the nominee / legal heir only against submission of relevant proof, to the satisfaction of the NBFC. Further, in order to enable a depositor to meet the expenses of an emergent nature, the NBFC may subject to satisfaction of the NBFC about the circumstances, prematurely repay tiny deposits (i.e., up to ₹10,000/-) and also other deposits, as per the provisions laid down by the Reserve Bank.  

An NBFC, which is not a problem company, subject to above provisions, may permit premature repayment of a public deposit after the lock–in period, at its sole discretion, at the rate of interest prescribed by the Reserve Bank.

A problem NBFC is prohibited from making premature repayment of any deposits or granting any loan against public deposits, as the case may be. The prohibition shall not, however, apply in the case of death of depositor or repayment of tiny deposits (i.e. up to ₹ 10,000/-) in order to enable a depositor to meet expenses of an emergent nature, subject to lock in period of 3 months in the latter case.

In terms of Section 45-IB of the RBI Act, 1934, the minimum level of liquid assets to be maintained by deposit taking NBFCs is 15% of public deposits outstanding as on the last working day of the second preceding quarter. Of the 15%, NBFCs are required to invest not less than 10% in approved securities and the remaining 5% can be in unencumbered term deposits with any Scheduled Commercial Bank (SCB)/ SIDBI/ NABARD; or bonds issued by SIDBI or NABARD. Thus, the liquid assets may consist of Government securities, Government guaranteed bonds and term deposits/ bonds, as specified.

The investment in Government Securities should be in dematerialised form which can be maintained in Subsidiary General Ledger (SGL) Account with the Reserve Bank or a Gilt Account with Constituents’ Subsidiary General Ledger (CSGL) Account or a dematerialized account with a depository through a depository participant registered with SEBI. In case of Government guaranteed bonds, the same may be kept in dematerialised form with SCB/ Stock Holding Corporation of India Limited (SHCIL) or in a dematerialised account with a depository through a depository participant registered with SEBI. However, in case Government bonds are in physical form, the same may be kept in safe custody of SCB/SHCIL along with term deposits of SCB/ SIDBI/ NABARD.

NBFCs have been directed to maintain the mandated liquid asset securities at a place where the registered office of the company is situated. However, if an NBFC intends to entrust the securities at a place other than the place at which its registered office is located, it may do so after obtaining the permission of the Reserve Bank in writing. The liquid assets maintained as above are to be utilised for payment of claims of depositors. However, deposits being unsecured in nature, the depositors do not have direct claim on liquid assets.

The Reserve Bank has issued detailed regulations on deposit acceptance, including the quantum of deposits that can be collected, mandatory credit rating, mandatory maintenance of liquid assets for repayment to depositors, manner of maintenance of its deposit books, prudential regulations including maintenance of adequate capital, limitations on exposures, and inspection of the NBFCs, besides others, to ensure that the NBFCs function on sound lines. If the Reserve Bank observes through its inspection or audit of any NBFC or through complaints or through market intelligence, that a certain NBFC is not complying with the Reserve Bank’s directions, it may prohibit the NBFC from accepting further deposits and prohibit it from selling its assets. In addition, if the depositor has complained to the Company Law Board (CLB) [now National Company Law Tribunal (NCLT)] which has ordered repayment and the NBFC has not complied with the CLB/NCLT order, the Reserve Bank can initiate prosecution of the NBFC, including criminal action and winding up of the NBFC.

More importantly, the Reserve Bank initiates prompt action, including imposing penalties and taking legal action against companies which are found to be violating its instructions/norms on the basis of Market Intelligence reports, complaints, exception reports from statutory auditors of the companies, information received through SLCC meetings, etc. The Reserve Bank immediately shares such information with all the financial sector regulators and enforcement agencies in the State Level Coordination Committee Meetings.

As part of its public policy measure, the Reserve Bank has been in the forefront in taking several initiatives to create awareness among the general public on the need to be careful while investing their hard earned money. The initiatives include issue of cautionary notices in print media and distribution of informative and educative brochures/pamphlets and close interaction with the public during awareness/outreach programs, Townhall events, participation in State Government sponsored trade fairs and exhibitions. At times, it even requests newspapers with large circulation (English and vernacular) to desist from accepting advertisements from unincorporated entities seeking deposits. The Reserve Bank has also launched its public awareness initiative with the tag line ‘RBI Kehta Hai’ which may be accessed at https://rbikehtahai.rbi.org.in/.

NBFCs shall obtain credit rating from any of the SEBI-registered credit rating agencies.

The minimum investment grade credit rating issued by any of the SEBI-registered credit rating agencies for deposit taking NBFCs shall be ‘BBB–‘.

In the event of downgrading of credit rating below the minimum specified investment grade rating, the deposit taking NBFC shall stop accepting public deposits and also stop renewing existing deposits with immediate effect, however the existing deposits would be allowed to run off to maturity. The NBFCs shall also report the position within fifteen working days to the Reserve Bank.