Restrictions on acceptance of public deposits by non-banking financial companies
4. Minimum Credit Rating
(1) On and from January 31, 1998, -
(i) no non-banking financial company having Net Owned Fund (hereinafter referred to as `NOF’) of twenty five lakh of rupees and above shall accept public deposit unless it has obtained minimum investment grade or other specified credit rating for fixed deposits from any one of the approved credit rating agencies at least once a year and a copy of the rating is sent to the Reserve Bank of India along with return on prudential norms :
Provided that this clause shall not apply to an Asset Finance Company19 referred to in clause (a) of sub-paragraph (4) hereunder;.
(ii) in the event of upgrading or downgrading of credit rating of any non-banking financial company to any level from the level previously held by the non-banking financial company, it shall within fifteen working days of its being so rated inform, in writing, of such upgrading/downgrading to the Reserve Bank of India.
Approved Credit Rating Agencies and Minimum Investment Grade Credit Rating
The names of approved credit rating agencies and the minimum credit rating shall be as follows:-
| Name of the agency |
Minimum investment Grade Rating
|
| (a) The Credit Rating Information Services of India Ltd. (CRISIL) |
FA- (FA Minus) |
| (b) ICRA Ltd. |
MA- (MA Minus) |
| (c) Credit Analysis & Research Ltd. (CARE) |
CARE BBB(FD) |
| (d) Fitch Ratings India Private Ltd. |
tA-(ind)(FD) |
Prohibition from accepting demand deposit
(2) On and from January 31, 1998, no non-banking financial company shall accept or renew any public deposit whether accepted before or after January 31, 1998, which is repayable on demand.
Period of Public Deposit
(3) On and from January 31, 1998, no non-banking financial company shall accept or renew any public deposit whether accepted before or after January 31, 1998 unless such deposit is repayable after a period of twelve months but not later than sixty months from the date of acceptance or renewal thereof.
(4) Ceiling on quantum of deposit
Asset Finance Company (AFC)
Loan Company (LC) and Investment Company (IC) –
Acceptance of public deposit
No asset finance company 23or loan company or investment company shall, accept or renew public deposit except as provided hereunder -
AFC
(a) An asset finance company -
(i) having NOF of twenty five lakh of rupees or more; and
(ii) complying with all the prudential norms with capital adequacy ratio of not less than fifteen percent as per last audited balance-sheet,
may, accept or renew public deposit, together with the amounts remaining outstanding in the books of the company as on the date of acceptance or renewal of such deposit, not exceeding one and one-half times of its NOF or public deposit up to ten crore of rupees, whichever is lower.
(b) An asset finance company, -
(i) having NOF of twenty five lakh of rupees or more;
(ii) complying with all the prudential norms; and
(iii) having minimum investment grade credit rating,
may, accept or renew public deposit, together with the amounts remaining outstanding in the books of the company as on the date of acceptance or renewal of such deposit, not exceeding four times of its NOF.
LC/IC
(c) A loan company or an investment company, –
(i) having NOF of twenty five lakh of rupees or more;
(ii) having minimum investment grade credit rating; and
(iii) complying with all the prudential norms with capital adequacy ratio of not less than fifteen percent as per last audited balance-sheet,
may, accept or renew public deposit, together with the amounts remaining outstanding in the books of the company as on the date of acceptance or renewal of such deposit, not exceeding one and one-half times of its NOF:
Provided that a loan company or an investment company which is complying with all the above conditions and having, as on the date of its coming into force of these directions, AAA (triple A) grade credit rating but not having capital adequacy ratio of fifteen percent may, so long it continues to maintain the same position of its credit rating, accept or renew public deposit only up to the extent of not exceeding the amount outstanding as at the close of business on December 18, 1998 or one and one-half time of its NOF, whichever is more, and shall bring down its public deposit to the level as specified in paragraph 4(6) of the directions and also attain the capital adequacy ratio of fifteen percent before March 31, 2000.
(d) A loan company or an investment company which complies with all the prudential norms and having, as on the date of coming into force of these directions –
(i) NOF of twenty five lakh of rupees or more; and
(ii) AA (double A) grade credit rating; but not having capital adequacy ratio of fifteen percent or above as per last audited balance-sheet,
may, so long it continues to maintain the same position of its credit rating, accept or renew the public deposit together with the amounts outstanding in the books of the company on the date of acceptance or renewal of such deposit, not exceeding an amount equivalent to its NOF until it attains the capital adequacy ratio of fifteen percent but not later than March 31, 2000 (as per audited balance-sheet) with other stipulations remaining the same.
(e) A loan company or an investment company which complies with all the prudential norms and having, as on the date of coming into force of these directions –
(i) NOF of twenty five lakh of rupees or more; and
(ii) A (single A) grade credit rating but not having capital adequacy ratio of fifteen percent or above as per last audited balance-sheet,
may, so long it continues to maintain the same position of its credit rating, accept or renew the public deposit, together with the amounts outstanding in the books of the company as on the date of acceptance or renewal of such deposit not exceeding an amount equivalent to one-half of its NOF until it attains the capital adequacy ratio of fifteen percent but not later than March 31, 2000 (as per audited balance-sheet) with other stipulations remaining the same.
Downgrading of Credit Rating
(5) In the event of downgrading of credit rating below the minimum specified investment grade as provided for in paragraph 4(4), a non-banking financial company shall regularise the excess deposit as provided hereunder :
AFC
(i) An asset finance company shall, -
(a) with immediate effect, stop accepting public deposit, if it is already holding public deposit to the extent permissible under sub-clause (b) of paragraph 4(4) above;
(b) report the position within fifteen working days to the Reserve Bank of India; and
(c) reduce, within three years from the date of such downgrading of credit rating, the amount of excess public deposit to nil or the appropriate extent permissible under sub-clause (a) of paragraph 4(4) above as the case may be, to which it is entitled to accept, by repayment as and when such deposit falls due or otherwise.
LC/IC
(ii) A loan company or an investment company shall,
(a) with immediate effect, stop accepting public deposit;
(b) report the position within fifteen working days to the Reserve Bank of India; and (c) reduce, within three years from the date of such downgrading of credit rating, the amount of excess public deposit to nil by repayment as and when such deposit falls due or otherwi
Regularisation of the public deposits accepted earlier and held in excess of the permissible extent
(6) Where an asset finance company29 or a loan company or an investment company holds, at the close of business on December 18, 1998 public deposit in excess of the appropriate extent to which it is entitled to accept under the above provisions of these directions, it shall, -
(i) stop accepting public deposit; and
(ii) reduce, before December 31, 2001, the amount of excess public deposit to nil or the appropriate extent permissible under sub-clause (d) or (e) of paragraph 4(4) above as the case may be, by repayment as and when such deposit falls due or otherwise.
Note :In the event of excess public deposits arising out of the regulatory ceiling or downgrading of credit rating, the NBFC may renew the maturing public deposit subject to the compliance of the repayment stipulations contained in sub-paragraphs (5) and (6) of paragraph 4 and other provisions of these directions. It is to clarify that no matured public deposit shall be renewed without the express and voluntary consent of the depositor.
Ceiling on the rate of interest
(7) On and from April 24, 2007, no non-banking financial company shall invite or accept or renew public deposit at a rate of interest exceeding twelve and half per cent per annum. Interest may be paid or compounded at rests which shall not be shorter than monthly rests.
(7A) On and from September 18, 2003, no non-banking financial company shall invite or accept or renew repatriable deposits from Non-Resident Indians in terms of Notification No.FEMA.5/2000-RB dated May 3, 2000 under Non-Resident (External) Account Scheme at a rate exceeding the rate specified by the Reserve Bank of India for such deposits with scheduled commercial banks.
Explanation :The period of above deposits shall be not less than one year and not more than three years.
Payment of brokerage
(8) On and from January 31, 1998 no non-banking financial company shall pay to any broker on public deposit collected by or through him, -
(i) brokerage, commission, incentive or any other benefit by whatever name called, in excess of two per cent of the deposit so collected; and
(ii) expenses by way of reimbursement on the basis of relative vouchers/bills produced by him, in excess of 0.5 percent of the deposit so collected.
Intimation of maturity of deposits to depositors
(8A) It shall be the obligation of the non-banking financial company to intimate the details of maturity of the deposit to the depositor at least two months before the date of maturity of the deposit."
Renewal of public deposit
(9) Where a non-banking financial company permits an existing depositor to renew the deposit before maturity for availing of the benefit of higher rate of interest, such company shall pay the depositor the increase in the rate of interest provided that, -
(i) the deposit is renewed in accordance with the other provisions of these directions and for a period longer than the remaining period of the original contract; and
(ii) the interest on the expired period of the deposit is reduced by one percentage point from the rate which the company would have ordinarily paid, had the deposit been accepted for the period for which such deposit had run; any interest paid earlier in excess of such reduced rate is recovered/adjusted.
Payment of interest on overdue public deposits
(10) A non-banking financial company may, at its discretion, allow interest on an overdue public deposit or a portion of the said overdue deposit from the date of maturity of the deposit subject to the conditions that:
(i) the total amount of overdue deposit or the part thereof is renewed in accordance with other relevant provisions of these directions, from the date of its maturity till some future date; and
(ii) the interest allowed shall be at the appropriate rate operative on the date of maturity of such overdue deposit which shall be payable only on the amount of deposit so renewed :
Provided that where a non-banking financial company fails to repay the deposit along with interest on maturity on the claim made by the depositor, the non-banking financial company shall be liable to pay interest from the date of claim till the date of repayment at the rate as applicable to the deposit.
Joint deposit
(11) Where so desired, deposits may be accepted in joint names with or without any of the clauses, namely, "Either or Survivor", "Number One or Survivor/s", "Anyone or Survivor/s".
Particulars to be specified in application form soliciting public deposits
(12) (i) On and from January 31, 1998, no non-banking financial company shall accept or renew any public deposit except on a written application from the depositor in the form to be supplied by the company, which form shall contain all the particulars specified in the Non-Banking Financial Companies and Miscellaneous Non-Banking Companies (Advertisement) Rules, 1977, made under section 58A of the Companies Act, 1956 (1 of 1956) and also contain the specific category of the depositor, i.e. whether the depositor is a shareholder or a director or a promoter of the company or a member of public.
(ii) The application form should also contain the following :- (a) the credit rating assigned for its fixed deposit and the name of the credit rating agency which rated the company or a statement from the management if it is an asset finance company33 that, the quantum of public deposit held by it is not exceeding one and one-half times of its NOF or not exceeding rupees ten crore whichever is less;
(b) in case of non-repayment of the deposit or part thereof as per the terms and conditions of such deposit, the depositor may approach the Eastern/Western/ Northern/Southern (delete which are inapplicable) Bench of Company Law Board whose full address is given hereunder: Give here the full address of the Bench of the Company Law Board under whose jurisdiction the registered office of the company is located;
(c) in case of any deficiency of the company in servicing its deposit, the depositor may approach the National Consumers Disputes Redressal Forum, the State Level Consumers Disputes Redressal Forum or the District Level Consumers Disputes Redressal Forum for relief;
(d) a statement that the financial position of the company as disclosed and the representations made in the application form are true and correct and that the company and its Board of Directors are responsible for the correctness and veracity thereof;
(e) the financial activities of the company are regulated by the Reserve Bank of India. It must, however, be distinctly understood that Reserve Bank of India does not undertake any responsibility for the financial soundness of the company or for the correctness of any of the statements or the representations made or opinions expressed by the company; and for repayment of deposit/discharge of liabilities by the company;
(f) at the end of application form but before the signature of the depositor, the following verification clause by the depositor should be appended:
"I have gone through the financials and other statements / particulars / representations furnished / made by the company and after careful consideration I am making the deposit with the company at my own risk and volition". (g) the information relating to and the aggregate dues from the facilities, both fund and non-fund based, extended to, and the aggregate dues from companies in the same group or other entities or business ventures in which the directors and / or the non-banking financial company are holding substantial interest and the total amount of exposure to such entities.
(iii) Every non-banking financial company shall obtain proper introduction of the new depositors before opening their accounts and accepting the deposits and keep on its record the evidence which it has relied upon for the purpose of such introduction.
Advertisement and statement in lieu of advertisement:
(13) (i) Every non-banking financial company soliciting public deposit shall comply with the provisions of the Non-Banking Financial Companies and Miscellaneous Non-Banking Companies (Advertisement) Rules, 1977 and shall also specify in every advertisement to be issued thereunder, the following :-
(a) the actual rate of return by way of interest, premium, bonus other advantage to the depositor;
(b) the mode of repayment of deposit;
(c) maturity period of deposit;
(d) the interest payable on deposit;
(e) the rate of interest which will be payable to the depositor in case the depositor withdraws the deposit prematurely;
(f) the terms and conditions subject to which a deposit will be renewed;
(g) any other special features relating to the terms and conditions subject to which the deposit is accepted/renewed;
(h) the information, relating to the aggregate dues (including the non-fund based facilities provided to) from companies in the same group or other entities or business ventures in which, the directors and/or the NBFC are holding substantial interest and the total amount of exposure to such entities; and]
(i) that the deposits solicited by it are not insured.
13 (i) (A) Where an NBFC displays any advertisement in electronic media such as TV, even without soliciting deposits, it should incorporate a caption/band in such advertisements indicating the following:
As regards deposit taking activity of the company, the viewers may refer to the advertisement in the newspaper/information furnished in the application form for soliciting public deposits; The company is having a valid Certificate of Registration dated _______ issued by the Reserve Bank of India under section 45-IA of the Reserve Bank of India Act, 1934. However, 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 company.
(ii) Where a non-banking financial company intends to accept public deposit without inviting or allowing or causing any other person to invite such deposit, it shall, before accepting such deposit, deliver to the Reserve Bank of India for record, a statement in lieu of advertisement containing all the particulars required to be included in the advertisement pursuant to the Non-Banking Financial Companies and Miscellaneous Non-Banking Companies (Advertisement) Rules, 1977 as also the particulars stated in clause (i) hereinabove, duly signed in the manner provided in the aforesaid Rules.
(iii) A statement delivered under clause (ii) above shall be valid till the expiry of six months from the date of closure of the financial year in which it is so delivered or until the date on which the balance sheet is laid before the company in general meeting or where the annual general meeting for any year has not been held, the latest day on which that meeting should have been held in accordance with the provisions of the Companies Act, 1956 (1 of 1956), whichever is earlier, and a fresh statement shall be delivered after the expiry of the validity of the statement, in each succeeding financial year before accepting public deposit in that financial year.
General provisions regarding repayment of public deposit
On and from October 5, 2004
Minimum lock- in period and Repayment in the event of death of the depositor
(14) (i) No non-banking financial company shall 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: Provided that in the event of death of a depositor, a non-banking financial company may repay the public deposit prematurely, even within the lock – in period, to the surviving depositor/s in the case of joint holding with survivor clause, or to the nominee or the legal heir/s of the deceased depositor, on the request of the surviving depositor/s/nominee/legal heir, and only against submission of proof of death, to the satisfaction of the company.
Repayment of public deposits by a non-banking financial company not being a problem non-banking financial company
(ii) Subject to the provisions contained in sub-paragraph (i), a non-banking financial company not being a problem Non-Banking Financial Company may,
(a) with effect from October 5, 2004, permit premature repayment of a public deposit at its sole discretion:
Provided that in the case of a deposit accepted prior to the aforesaid date, such non-banking financial company may, if so permitted by the terms and conditions of acceptance of such deposit, repay it prematurely at the request of the depositor, after the expiry of three months from the date of deposit;
(b) grant a loan up to seventy-five percent of the amount of public deposit to a depositor after the expiry of three months from the date of deposit at a rate of interest two percentage points above the interest rate payable on the deposit.
Repayment of public deposits by a problem non-banking financial company
(iii) Subject to the provisions contained in sub-paragraph (i), in order to enable a depositor to meet expenses of an emergent nature, a problem non-banking financial company may make premature repayment of, or grant a loan against, a public deposit in the following cases only, namely:
(a) repay a tiny deposit in entirety or repay any other public deposit up to an amount not exceeding Rs. 10,000/-; or
(b) grant a loan against a tiny deposit or up to an amount not exceeding Rs. 10,000/- against any other deposit, at a rate of interest two percentage points above the interest rate payable on the deposit.
Clubbing of deposits by a problem non-banking financial company
(iv) All deposit accounts standing to the credit of sole/first named depositor in the same capacity shall be clubbed and treated as one deposit account for the
purpose of premature repayment or grant of loan by a problem non-banking financial company;
Provided that this clause shall not apply to premature repayment in the event of death of depositor as provided in sub-paragraph (i).]
Rate of interest on premature repayment of public deposits
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(v) Where a non-banking financial company, whether at its sole discretion or at the request of the depositor, as the case may be, repays a public deposit after three months from the date of its acceptance, but before its maturity (including premature repayment in the case of death of the depositor), it shall pay interest at the following rates: After 3 months but before 6 months
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No interest
|
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After 6 months but before the date of maturity
|
The interest payable shall be 2 per cent lower than the interest rate applicable to a public deposit for the period for which the public deposit has run or if no rate has been specified for that period, then 3 per cent lower than the minimum rate at which public deposits are accepted by the non-banking financial company.
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Explanation: For the purpose of this paragraph,
(a) `problem non-banking financial company’ means a non-banking financial company which -
(i) has refused or failed to meet within five working days any lawful demand for repayment of the matured public deposits ; or
(ii) intimates the CLB under section 58AA of the Companies Act, 1956, about its default to a small depositor in repayment of any public deposit or part thereof or any interest thereupon; or (iii) approaches the Bank for withdrawal of the liquid asset securities to meet its deposit obligations; or
(iv) approaches the Bank for any relief or relaxation or exemption from the provisions of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 or from that of Prudential Norms for avoiding default in meeting public deposit or other obligations; or
(v) has been identified by the Bank to be a problem non-banking financial company either suo moto or based on the complaints from the depositors about non-repayment of public deposits or on complaints from the company’s lenders about non-payment of dues.
(b) ‘tiny deposit’ means the aggregate amount of public deposits not exceeding Rs. 10,000/- standing in the name of the sole or the first named depositor in the same capacity in all the branches of the non-banking financial company."
Furnishing of receipt to depositor
15) (i) Every non-banking financial company shall furnish to every depositor or his agent or group of joint depositors, a receipt for every amount received by the company by way of deposit.
(ii) The said receipt shall be duly signed by an officer authorised by the company in that behalf and shall state the date of deposit, the name of the depositor, the amount in words and figures received by the company by way of deposit, rate of interest payable thereon and the date on which the deposit is repayable :
Provided that, if such receipts pertain to instalments subsequent to the first instalment of a recurring deposit it may contain only name of the depositor and date and amount of deposit.
Register of deposit
(16) (i) Every non-banking financial company shall keep one or more registers in respect of all deposits in which shall be entered separately in the case of each depositor the following particulars, namely -
(a) name and address of the depositor,
(b) date and amount of each deposit, (c) duration and the due date of each deposit,
(d) date and amount of accrued interest or premium on each deposit,
(e) date of claim made by the depositor,
(f) date and amount of each repayment, whether of principal, interest or premium,
(g) the reasons for delay in repayment beyond five working days and
(h) any other particulars relating to the deposit.
(ii) The register or registers aforesaid shall be kept at each branch in respect of the deposit accounts opened by that branch of the company and a consolidated register for all the branches taken together at the registered office of the company and shall be preserved in good order for a period of not less than eight calendar years following the financial year in which the latest entry is made of the repayment or renewal of any deposit of which particulars are contained in the register: Provided that, if the company keeps the books of account referred to in sub-section (1) of section 209 of the Companies Act, 1956 (1 of 1956) at any place other than its registered office in accordance with the proviso to that sub-section, it shall be deemed to be sufficient compliance with this clause if the register aforesaid is kept at such other place, subject to the condition that the company delivers to the Reserve Bank of India a copy of the notice filed with the Registrar of Companies under the proviso to the said sub-section within seven days of such filing.
(i) no non-banking financial company having Net Owned Fund (hereinafter referred to as `NOF’) of twenty five lakh of rupees and above shall accept public deposit unless it has obtained minimum investment grade or other specified credit rating for fixed deposits from any one of the approved credit rating agencies at least once a year and a copy of the rating is sent to the Reserve Bank of India along with return on prudential norms :
Provided that this clause shall not apply to an Asset Finance Company19 referred to in clause (a) of sub-paragraph (4) hereunder;.
(ii) in the event of upgrading or downgrading of credit rating of any non-banking financial company to any level from the level previously held by the non-banking financial company, it shall within fifteen working days of its being so rated inform, in writing, of such upgrading/downgrading to the Reserve Bank of India.
Approved Credit Rating Agencies and Minimum Investment Grade Credit Rating
The names of approved credit rating agencies and the minimum credit rating shall be as follows:-
| Name of the agency |
Minimum investment Grade Rating
|
| (a) The Credit Rating Information Services of India Ltd. (CRISIL) |
FA- (FA Minus) |
| (b) ICRA Ltd. |
MA- (MA Minus) |
| (c) Credit Analysis & Research Ltd. (CARE) |
CARE BBB(FD) |
| (d) Fitch Ratings India Private Ltd. |
tA-(ind)(FD) |
Prohibition from accepting demand deposit
(2) On and from January 31, 1998, no non-banking financial company shall accept or renew any public deposit whether accepted before or after January 31, 1998, which is repayable on demand.
Period of Public Deposit (3) On and from January 31, 1998, no non-banking financial company shall accept or renew any public deposit whether accepted before or after January 31, 1998 unless such deposit is repayable after a period of twelve months but not later than sixty months from the date of acceptance or renewal thereof.
(4) Ceiling on quantum of deposit
Asset Finance Company (AFC)
Loan Company (LC) and Investment Company (IC) –
Acceptance of public deposit
No asset finance company 23or loan company or investment company shall, accept or renew public deposit except as provided hereunder -
AFC
(a) An asset finance company25 -
(i) having NOF of twenty five lakh of rupees or more; and
(ii) complying with all the prudential norms with capital adequacy ratio of not less than fifteen percent as per last audited balance-sheet,
may, accept or renew public deposit, together with the amounts remaining outstanding in the books of the company as on the date of acceptance or renewal of such deposit, not exceeding one and one-half times of its NOF or public deposit up to ten crore of rupees, whichever is lower.
(b) An asset finance company, -
(i) having NOF of twenty five lakh of rupees or more;
(ii) complying with all the prudential norms; and
(iii) having minimum investment grade credit rating,
may, accept or renew public deposit, together with the amounts remaining outstanding in the books of the company as on the date of acceptance or renewal of such deposit, not exceeding four times of its NOF.
LC/IC
(c) A loan company or an investment company, –
(i) having NOF of twenty five lakh of rupees or more;
(ii) having minimum investment grade credit rating; and
(iii) complying with all the prudential norms with capital adequacy ratio of not less than fifteen percent as per last audited balance-sheet,
may, accept or renew public deposit, together with the amounts remaining outstanding in the books of the company as on the date of acceptance or renewal of such deposit, not exceeding one and one-half times of its NOF:
Provided that a loan company or an investment company which is complying with all the above conditions and having, as on the date of its coming into force of these directions, AAA (triple A) grade credit rating but not having capital adequacy ratio of fifteen percent may, so long it continues to maintain the same position of its credit rating, accept or renew public deposit only up to the extent of not exceeding the amount outstanding as at the close of business on December 18, 1998 or one and one-half time of its NOF, whichever is more, and shall bring down its public deposit to the level as specified in paragraph 4(6) of the directions and also attain the capital adequacy ratio of fifteen percent before March 31, 2000.
(d) A loan company or an investment company which complies with all the prudential norms and having, as on the date of coming into force of these directions –
(i) NOF of twenty five lakh of rupees or more; and
(ii) AA (double A) grade credit rating; but not having capital adequacy ratio of fifteen percent or above as per last audited balance-sheet,
may, so long it continues to maintain the same position of its credit rating, accept or renew the public deposit together with the amounts outstanding in the books of the company on the date of acceptance or renewal of such deposit, not exceeding an amount equivalent to its NOF until it attains the capital adequacy ratio of fifteen percent but not later than March 31, 2000 (as per audited balance-sheet) with other stipulations remaining the same.
(e) A loan company or an investment company which complies with all the prudential norms and having, as on the date of coming into force of these directions –
(i) NOF of twenty five lakh of rupees or more; and
(ii) A (single A) grade credit rating but not having capital adequacy ratio of fifteen percent or above as per last audited balance-sheet,
may, so long it continues to maintain the same position of its credit rating, accept or renew the public deposit, together with the
amounts outstanding in the books of the company as on the date of acceptance or renewal of such deposit not exceeding an amount equivalent to one-half of its NOF until it attains the capital adequacy ratio of fifteen percent but not later than March 31, 2000 (as per audited balance-sheet) with other stipulations remaining the same.
Downgrading of Credit Rating
(5) In the event of downgrading of credit rating below the minimum specified investment grade as provided for in paragraph 4(4), a non-banking financial company shall regularise the excess deposit as provided hereunder :
AFC
(i) An asset finance company shall, -
(a) with immediate effect, stop accepting public deposit, if it is already holding public deposit to the extent permissible under sub-clause (b) of paragraph 4(4) above;
(b) report the position within fifteen working days to the Reserve Bank of India; and
(c) reduce, within three years from the date of such downgrading of credit rating, the amount of excess public deposit to nil or the appropriate extent permissible under sub-clause (a) of paragraph 4(4) above as the case may be, to which it is entitled to accept, by repayment as and when such deposit falls due or otherwise.
LC/IC
(ii) A loan company or an investment company shall,
(a) with immediate effect, stop accepting public deposit;
(b) report the position within fifteen working days to the Reserve Bank of India; and (c) reduce, within three years from the date of such downgrading of credit rating, the amount of excess public deposit to nil by repayment as and when such deposit falls due or otherwise.
Regularisation of the public deposits accepted earlier and held in excess of the permissible extent
(6) Where an asset finance company29 or a loan company or an investment company holds, at the close of business on December 18, 1998 public deposit in excess of the appropriate extent to which it is entitled to accept under the above provisions of these directions, it shall, -
(i) stop accepting public deposit; and
(ii) reduce, before December 31, 2001, the amount of excess public deposit to nil or the appropriate extent permissible under sub-clause (d) or (e) of paragraph 4(4) above as the case may be, by repayment as and when such deposit falls due or otherwise.
Note : In the event of excess public deposits arising out of the regulatory ceiling or downgrading of credit rating, the NBFC may renew the maturing public deposit subject to the compliance of the repayment stipulations contained in sub-paragraphs (5) and (6) of paragraph 4 and other provisions of these directions. It is to clarify that no matured public deposit shall be renewed without the express and voluntary consent of the depositor.
Ceiling on the rate of interest
(7) On and from April 24, 2007, no non-banking financial company shall invite or accept or renew public deposit at a rate of interest exceeding twelve and half per cent per annum. Interest may be paid or compounded at rests which shall not be shorter than monthly rests.
(7A) On and from September 18, 2003, no non-banking financial company shall invite or accept or renew repatriable deposits from Non-Resident Indians in terms of Notification No.FEMA.5/2000-RB dated May 3, 2000 under Non-Resident (External) Account Scheme at a rate exceeding the rate specified by the Reserve Bank of India for such deposits with scheduled commercial banks.
Explanation The period of above deposits shall be not less than one year and not more than three years.
Payment of brokerage
(8) On and from January 31, 1998 no non-banking financial company shall pay to any broker on public deposit collected by or through him, -
(i) brokerage, commission, incentive or any other benefit by whatever name called, in excess of two per cent of the deposit so collected; and
(ii) expenses by way of reimbursement on the basis of relative vouchers/bills produced by him, in excess of 0.5 percent of the deposit so collected.
Intimation of maturity of deposits to depositors
(8A) It shall be the obligation of the non-banking financial company to intimate the details of maturity of the deposit to the depositor at least two months before the date of maturity of the deposit."
Renewal of public deposit
(9) Where a non-banking financial company permits an existing depositor to renew the deposit before maturity for availing of the benefit of higher rate of interest, such company shall pay the depositor the increase in the rate of interest provided that, -
(i) the deposit is renewed in accordance with the other provisions of these directions and for a period longer than the remaining period of the original contract; and
(ii) the interest on the expired period of the deposit is reduced by one percentage point from the rate which the company would have ordinarily paid, had the deposit been accepted for the period for which such deposit had run; any interest paid earlier in excess of such reduced rate is recovered/adjusted.
Payment of interest on overdue public deposits (10) A non-banking financial company may, at its discretion, allow interest on an overdue public deposit or a portion of the said overdue deposit from the date of maturity of the deposit subject to the conditions that:
(i) the total amount of overdue deposit or the part thereof is renewed in accordance with other relevant provisions of these directions, from the date of its maturity till some future date; and
(ii) the interest allowed shall be at the appropriate rate operative on the date of maturity of such overdue deposit which shall be payable only on the amount of deposit so renewed :
Provided that where a non-banking financial company fails to repay the deposit along with interest on maturity on the claim made by the depositor, the non-banking financial company shall be liable to pay interest from the date of claim till the date of repayment at the rate as applicable to the deposit.
Joint deposit
(11) Where so desired, deposits may be accepted in joint names with or without any of the clauses, namely, "Either or Survivor", "Number One or Survivor/s", "Anyone or Survivor/s".
Particulars to be specified in application form soliciting public deposits
(12) (i) On and from January 31, 1998, no non-banking financial company shall accept or renew any public deposit except on a written application from the depositor in the form to be supplied by the company, which form shall contain all the particulars specified in the Non-Banking Financial Companies and Miscellaneous Non-Banking Companies (Advertisement) Rules, 1977, made under section 58A of the Companies Act, 1956 (1 of 1956) and also contain the specific category of the depositor, i.e. whether the depositor is a shareholder or a director or a promoter of the company or a member of public.
(ii) The application form should also contain the following :- (a) the credit rating assigned for its fixed deposit and the name of the credit rating agency which rated the company or a statement from the management if it is an asset finance company that, the quantum of public deposit held by it is not exceeding one and one-half times of its NOF or not exceeding rupees ten crore whichever is less;
(b) in case of non-repayment of the deposit or part thereof as per the terms and conditions of such deposit, the depositor may approach the Eastern/Western/ Northern/Southern (delete which are inapplicable) Bench of Company Law Board whose full address is given hereunder:
Give here the full address of the Bench of the Company Law Board under whose jurisdiction the registered office of the company is located;
(c) in case of any deficiency of the company in servicing its deposit, the depositor may approach the National Consumers Disputes Redressal Forum, the State Level Consumers Disputes Redressal Forum or the District Level Consumers Disputes Redressal Forum for relief;
(d) a statement that the financial position of the company as disclosed and the representations made in the application form are true and correct and that the company and its Board of Directors are responsible for the correctness and veracity thereof;
(e) the financial activities of the company are regulated by the Reserve Bank of India. It must, however, be distinctly understood that Reserve Bank of India does not undertake any responsibility for the financial soundness of the company or for the correctness of any of the statements or the representations made or opinions expressed by the company; and for repayment of deposit/discharge of liabilities by the company;
(f) at the end of application form but before the signature of the depositor, the following verification clause by the depositor should be appended:
"I have gone through the financials and other statements / particulars / representations furnished / made by the company and after careful consideration I am making the deposit with the company at my own risk and volition". (g) the information relating to and the aggregate dues from the facilities, both fund and non-fund based, extended to, and the aggregate dues from companies in the same group or other entities or business ventures in which the directors and / or the non-banking financial company are holding substantial interest and the total amount of exposure to such entities.
(iii) Every non-banking financial company shall obtain proper introduction of the new depositors before opening their accounts and accepting the deposits and keep on its record the evidence which it has relied upon for the purpose of such introduction.
Advertisement and statement in lieu of advertisement:
(13) (i) Every non-banking financial company soliciting public deposit shall comply with the provisions of the Non-Banking Financial Companies and Miscellaneous Non-Banking Companies (Advertisement) Rules, 1977 and shall also specify in every advertisement to be issued thereunder, the following :-
(a) the actual rate of return by way of interest, premium, bonus other advantage to the depositor;
(b) the mode of repayment of deposit;
(c) maturity period of deposit;
(d) the interest payable on deposit;
(e) the rate of interest which will be payable to the depositor in case the depositor withdraws the deposit prematurely;
(f) the terms and conditions subject to which a deposit will be renewed;
(g) any other special features relating to the terms and conditions subject to which the deposit is accepted/renewed;
(h) the information, relating to the aggregate dues (including the non-fund based facilities provided to) from companies in the same group or other entities or business ventures in which, the directors and/or the NBFC are holding substantial interest and the total amount of exposure to such entities; and]
(i) that the deposits solicited by it are not insured.
13 (i) (A) Where an NBFC displays any advertisement in electronic media such as TV, even without soliciting deposits, it should incorporate a caption/band in such advertisements indicating the following:
As regards deposit taking activity of the company, the viewers may refer to the advertisement in the newspaper/information furnished in the application form for soliciting public deposits; The company is having a valid Certificate of Registration dated _______ issued by the Reserve Bank of India under section 45-IA of the Reserve Bank of India Act, 1934. However, 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 company.
(ii) Where a non-banking financial company intends to accept public deposit without inviting or allowing or causing any other person to invite such deposit, it shall, before accepting such deposit, deliver to the Reserve Bank of India for record, a statement in lieu of advertisement containing all the particulars required to be included in the advertisement pursuant to the Non-Banking Financial Companies and Miscellaneous Non-Banking Companies (Advertisement) Rules, 1977 as also the particulars stated in clause (i) hereinabove, duly signed in the manner provided in the aforesaid Rules.
(iii) A statement delivered under clause (ii) above shall be valid till the expiry of six months from the date of closure of the financial year in which it is so delivered or until the date on which the balance sheet is laid before the company in general meeting or where the annual general meeting for any year has not been held, the latest day on which that meeting should have been held in accordance with the provisions of the Companies Act, 1956 (1 of 1956), whichever is earlier, and a fresh statement shall be delivered after the expiry of the validity of the statement, in each succeeding financial year before accepting public deposit in that financial year.
General provisions regarding repayment of public deposit
On and from October 5, 2004
Minimum lock- in period and Repayment in the event of death of the depositor
(14) (i) No non-banking financial company shall 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: Provided that in the event of death of a depositor, a non-banking financial company may repay the public deposit prematurely, even within the lock – in period, to the surviving depositor/s in the case of joint holding with survivor clause, or to the nominee or the legal heir/s of the deceased depositor, on the request of the surviving depositor/s/nominee/legal heir, and only against submission of proof of death, to the satisfaction of the company.
Repayment of public deposits by a non-banking financial company not being a problem non-banking financial company
(ii) Subject to the provisions contained in sub-paragraph (i), a non-banking financial company not being a problem Non-Banking Financial Company may,
(a) with effect from October 5, 2004, permit premature repayment of a public deposit at its sole discretion:
Provided that in the case of a deposit accepted prior to the aforesaid date, such non-banking financial company may, if so permitted by the terms and conditions of acceptance of such deposit, repay it prematurely at the request of the depositor, after the expiry of three months from the date of deposit;
(b) grant a loan up to seventy-five percent of the amount of public deposit to a depositor after the expiry of three months from the date of deposit at a rate of interest two percentage points above the interest rate payable on the deposit.
Repayment of public deposits by a problem non-banking financial company
(iii) Subject to the provisions contained in sub-paragraph (i), in order to enable a depositor to meet expenses of an emergent nature, a problem non-banking financial company may make premature repayment of, or grant a loan against, a public deposit in the following cases only, namely:
(a) repay a tiny deposit in entirety or repay any other public deposit up to an amount not exceeding Rs. 10,000/-; or
(b) grant a loan against a tiny deposit or up to an amount not exceeding Rs. 10,000/- against any other deposit, at a rate of interest two percentage points above the interest rate payable on the deposit.
Clubbing of deposits by a problem non-banking financial company (iv) All deposit accounts standing to the credit of sole/first named depositor in the same capacity shall be clubbed and treated as one deposit account for the
purpose of premature repayment or grant of loan by a problem non-banking financial company;
Provided that this clause shall not apply to premature repayment in the event of death of depositor as provided in sub-paragraph (i).]
Rate of interest on premature repayment of public deposits
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(v) Where a non-banking financial company, whether at its sole discretion or at the request of the depositor, as the case may be, repays a public deposit after three months from the date of its acceptance, but before its maturity (including premature repayment in the case of death of the depositor), it shall pay interest at the following rates: After 3 months but before 6 months
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No interest
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After 6 months but before the date of maturity
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The interest payable shall be 2 per cent lower than the interest rate applicable to a public deposit for the period for which the public deposit has run or if no rate has been specified for that period, then 3 per cent lower than the minimum rate at which public deposits are accepted by the non-banking financial company.
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Explanation: For the purpose of this paragraph,
(a) `problem non-banking financial company’ means a non-banking financial company which -
(i) has refused or failed to meet within five working days any lawful demand for repayment of the matured public deposits ; or
(ii) intimates the CLB under section 58AA of the Companies Act, 1956, about its default to a small depositor in repayment of any public deposit or part thereof or any interest thereupon; or (iii) approaches the Bank for withdrawal of the liquid asset securities to meet its deposit obligations; or
(iv) approaches the Bank for any relief or relaxation or exemption from the provisions of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 or from that of Prudential Norms for avoiding default in meeting public deposit or other obligations; or
(v) has been identified by the Bank to be a problem non-banking financial company either suo moto or based on the complaints from the depositors about non-repayment of public deposits or on complaints from the company’s lenders about non-payment of dues.
(b) ‘tiny deposit’ means the aggregate amount of public deposits not exceeding Rs. 10,000/- standing in the name of the sole or the first named depositor in the same capacity in all the branches of the non-banking financial company."
Furnishing of receipt to depositor
15) (i) Every non-banking financial company shall furnish to every depositor or his agent or group of joint depositors, a receipt for every amount received by the company by way of deposit.
(ii) The said receipt shall be duly signed by an officer authorised by the company in that behalf and shall state the date of deposit, the name of the depositor, the amount in words and figures received by the company by way of deposit, rate of interest payable thereon and the date on which the deposit is repayable :
Provided that, if such receipts pertain to instalments subsequent to the first instalment of a recurring deposit it may contain only name of the depositor and date and amount of deposit.
Register of deposit
(16)(i) Every non-banking financial company shall keep one or more registers in respect of all deposits in which shall be entered separately in the case of each depositor the following particulars, namely -
(a) name and address of the depositor,
(b) date and amount of each deposit, (c) duration and the due date of each deposit,
(d) date and amount of accrued interest or premium on each deposit,
(e) date of claim made by the depositor,
(f) date and amount of each repayment, whether of principal, interest or premium,
(g) the reasons for delay in repayment beyond five working days and
(h) any other particulars relating to the deposit.
(ii) The register or registers aforesaid shall be kept at each branch in respect of the deposit accounts opened by that branch of the company and a consolidated register for all the branches taken together at the registered office of the company and shall be preserved in good order for a period of not less than eight calendar years following the financial year in which the latest entry is made of the repayment or renewal of any deposit of which particulars are contained in the register: Provided that, if the company keeps the books of account referred to in sub-section (1) of section 209 of the Companies Act, 1956 (1 of 1956) at any place other than its registered office in accordance with the proviso to that sub-section, it shall be deemed to be sufficient compliance with this clause if the register aforesaid is kept at such other place, subject to the condition that the company delivers to the Reserve Bank of India a copy of the notice filed with the Registrar of Companies under the proviso to the said sub-section within seven days of such filing. |