No. Co-operative Credit Societies cannot accept deposits from general public. They can accept deposits only from their members within the limit specified in their bye laws. It may be noted that Co-operative Credit Societies do not fall under the regulatory purview of the Reserve Bank and fall under the purview of Registrar of Cooperative Societies.

No. These societies are formed for salaried employees and hence they can accept deposit only from their own members and not from general public. It may be noted that Salary Earners’ Societies do not fall under the regulatory purview of the Reserve Bank and fall under the purview of Registrar of Cooperative Societies.

Yes, nomination facility is available to the depositors of NBFCs. The Rules for nomination facility are provided for in Section 45QB of the RBI Act, 1934. NBFCs have been advised to adopt the Banking Companies (Nomination) Rules, 1985 made under Section 45ZA of the Banking Regulation Act, 1949. Accordingly, depositor/s of NBFCs are permitted to nominate a person to whom the NBFC can return the deposit in the event of the death of the depositor/s. NBFCs are advised to accept nominations made by the depositors in the form similar to one specified under the said rules, viz., Form DA 1 for the purpose of nomination, and Form DA2 and DA3 for cancellation of nomination and change of nomination respectively.

NBFCs that ought to have sought registration from the Reserve Bank but are functioning without doing so are committing a breach of law. Such companies are liable for action as envisaged under the RBI Act, 1934. To identify such entities, the Reserve Bank has multiple sources of information. These include market intelligence, complaints received from affected parties, industry sources, and exception reports submitted by statutory auditors in terms of Master Direction - Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2016 (as amended from time to time). Further, the State Level Co-ordination Committees (SLCC) is convened by the Reserve Bank in all the States/UTs on quarterly basis. The SLCC is now chaired by the Chief Secretary/ Administrator of the concerned State/UT and has, as its members, apart from the Reserve Bank, the Regional Directorate of the MCA/ ROC, local unit of SEBI, NHB, Registrar of Chits, ICAI, Economic Intelligence Unit of the State Police and officials from Law and Home Ministries of the State Government. As all the relevant financial sector regulators and enforcement agencies participate in the SLCC, it is possible to quickly share the information and agree on an effective course of action to be taken against entities indulging in unauthorized and suspect businesses involving funds mobilization from public.

No. Proprietorship and partnership concerns are un-incorporated bodies. Hence, they are prohibited under the RBI Act 1934 from accepting public deposits. Such unincorporated entities, if found accepting public deposits, are liable for penal action under the Act.

It depends on whether the money is received as advance for delivering jewellery at a future date or whether the money is received with a promise to return the same with interest. The money accepted by Jewellery shops in instalments for the purpose of delivering jewellery at the end of the period of contract is not deposit. It will amount to acceptance of deposits if in return for the money received, the jewellery shop promises to return the principal amount along with interest.

NBFCs are prohibited by the Reserve Bank from associating with any unincorporated bodies. If NBFCs associate themselves with unincorporated entities which are accepting deposits in contravention of RBI Act, they are also liable for penal action under the Act, or action under the Protection of Interest of Depositors (in Financial Establishments) Act, or the Banning of Unregulated Deposit Schemes Act, 2019, as applicable.

Deposits are defined under the RBI Act 1934 as acceptance of money other than that raised by way of share capital, money received from banks and other financial institutions, money received as security deposit, earnest money and advance against goods or services and subscriptions to chits. All other amounts received in any form are treated as deposits. Chit Funds activity involves contributions by members in instalments by way of subscription to the Chit and by rotation each member of the Chit receives the chit amount. The subscriptions are specifically excluded from the definition of deposits and cannot be termed as deposits. While Chit funds may collect subscriptions as above, they are prohibited by the Reserve Bank from accepting deposits from public (except from shareholders) with effect from August 2009.

Some of the important regulations relating to acceptance of deposits by NBFCs are as under:

i. The NBFCs are allowed to accept/renew public deposits which are repayable after a period of 12 months but not later than 60 months. They cannot accept deposits repayable on demand.

ii. NBFCs cannot offer interest rates higher than the ceiling rate prescribed by the Reserve Bank from time to time. The present ceiling is 12.5 per cent per annum. The interest may be paid or compounded at rests not shorter than monthly rests.

iii. NBFCs should have minimum investment grade credit rating of ‘BBB–‘ from any of the SEBI-registered credit rating agency which shall be obtained at least once in a year.

iv.  The deposits with NBFCs are not insured.

v.  The repayment of deposits by NBFCs is not guaranteed by the Reserve Bank.

vi. Certain mandatory disclosures are to be made about the company in the Application Form issued by the company soliciting deposits.

A depositor wanting to place deposit with an NBFC must take the following precautions before placing deposits:

i.  That the NBFC is registered with the Reserve Bank and specifically authorized by the Reserve Bank to accept deposits. The list of deposit taking NBFCs entitled to accept deposits is available on the web site of the Reserve Bank of India (www.rbi.org.in) under ‘Regulation → Non-Banking’. The depositor should check the above list to know about NBFCs permitted to accept public deposits therein.

ii.  NBFCs have to prominently display the Certificate of Registration (CoR) issued by the Reserve Bank at place of business. This CoR should also reflect that the NBFC has been specifically authorized by the Reserve Bank to accept deposits. Depositors must scrutinize the CoR to ensure that the NBFC is authorized to accept deposits.

iii. The maximum interest rate that an NBFC can pay to a depositor should not exceed 12.5% currently. The Reserve Bank keeps altering the interest rates depending on the macro-economic environment and publishes the change in the interest rates on its website (www.rbi.org.in) under ‘notifications’.

iv. The depositor must insist on a proper receipt for every amount of deposit placed with the NBFC. The receipt should be duly signed by an officer authorized by the NBFC and should state the date of the deposit, the name of the depositor, the amount in words and figures, rate of interest payable, maturity date and amount.

v. In the case of brokers/agents, etc., collecting public deposits on behalf of NBFCs, the depositors should satisfy themselves that the brokers/agents are duly authorized by the NBFC.

vi. The depositor must bear in mind that public deposits are unsecured and Deposit Insurance facility is not available to depositors of NBFCs.

vii. The Reserve Bank of India does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the NBFC.