No. The Reserve Bank does not guarantee repayment of deposits by NBFCs even though they may be authorized to collect deposits. As such, depositors should take informed decisions while placing deposits with an NBFC.

If an NBFC defaults in repayment of deposit, the depositor can approach the Company Law Board (now National Company Law Tribunal) or Consumer Forum or file a civil suit in a Court of Law to recover the deposits. Further, at the level of the State Government, the State Legislations on Protection of Interest of Depositors (in Financial Establishments) empowers the State Governments to take action even before the default takes place or complaints are received from depositors. If there is perpetration of an offence and if the intention is to defraud, the State Government can even attach properties. NBFCs are also advised to lay down an appropriate grievance redressal mechanism as indicated in reply to question 57 below.

When an NBFC fails to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the CLB/NCLT either on its own motion or on an application from the depositor, direct by order, the NBFC to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order. After making the payment, the company will need to file the compliance with the local office of the Reserve Bank of India.

As explained above, the depositor can approach CLB/NCLT by mailing an application in prescribed form to the appropriate bench of the CLB/NCLT according to its territorial jurisdiction.

The details of addresses and territorial jurisdiction of the bench officers of CLB/NCLT are available on the website https://nclt.gov.in/about-nclt.

An Official Liquidator is appointed by the court after giving the company reasonable opportunity of being heard in a winding up petition. The liquidator performs the duties of winding up of the company and such duties in reference thereto as the court may impose. Where the court has appointed an official liquidator or provisional liquidator, he becomes custodian of the property of the company and runs day-to-day affairs of the company. He has to draw up a statement of affairs of the company in prescribed form containing particulars of assets of the company, its debts and liabilities, names/residences/occupations of its creditors, the debts due to the company and such other information as may be prescribed. The scheme is drawn up by the liquidator and same is put up to the court for approval. The liquidator realizes the assets of the company and arranges to repay the creditors according to the scheme approved by the court. The liquidator generally inserts advertisement in the newspaper inviting claims from depositors/investors in compliance with court orders. Therefore, the depositors should file the claims within due time as per such notices of the liquidator.

With the enactment of the Insolvency and Bankruptcy Code, 2016, the corporate insolvency resolution process can be initiated by the Reserve Bank subject to the provisions of the Code, provided, the asset size of the NBFC is ₹500 crore or more. Thereafter, the resolution process would be undertaken as per the process prescribed under IBC.

The depositor is entitled to approach the relevant authorities as permissible under Law.

It is prescribed that the Board of Directors of NBFCs shall lay down the appropriate grievance redressal mechanism within the organisation and such mechanism shall ensure that all disputes arising out of the decisions of the lending institution’s functionaries are heard and disposed of at least at the next higher level.

Further, NBFCs (excluding Housing Finance Companies) which are authorised to accept deposits; or have customer interface and an asset size of ₹100 crore & above as on the date of the last audited balance sheet, are covered under Reserve Bank - Integrated Ombudsman Scheme, 2021 (as amended from time to time). In case of grievances against NBFCs, which are covered under RBI Ombudsman Scheme, are not redressed within a period of one month, the customer may approach the Ombudsman through its CMS portal accessible on the link https://cms.rbi.org.in/cms/indexpage.html#eng.

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.

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.

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.