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Notification as amended upto June 30, 2012 – “Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998” .Part:- 2


Ozg NBFC Consultant

Ozg Center | Delhi | Mumbai | Chennai | Bangalore | Kolkata

Back Office Phone # 09811415831-37-61-72-84-92-94

W: nbfc.in | Email: ask@nbfc.in



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:
  1. repay a tiny deposit in entirety or repay any other public deposit up to an amount not exceeding Rs. 10,000/-; or
  2. 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
(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 No interest
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.

Explanation: For the purpose of this paragraph,
(a) ’problem non-banking financial company’ means a non-banking financial company which -
  1. has refused or failed to meet within five working days any lawful demand for  repayment of the matured public deposits ; or
  2. 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
  3. approaches the Bank for withdrawal of the liquid asset securities to meet its deposit obligations; or
  4. 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
  5. 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 -
  1. name and address of the depositor,
  2. date and amount of each deposit,
  3. duration and the due date of each deposit,
  4. date and amount of accrued interest or premium on each deposit,
  5. date of claim made by the depositor,
  6. date and amount of each repayment, whether of principal, interest or premium,
  7. the reasons for delay in repayment beyond five working days and
  8. 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.
4A. Branches and appointment of agents to collect deposits
On and from January 13, 2000, no non-banking financial company shall open its branch or appoint agents to collect deposits except as provided hereunder :
(i) a non-banking financial company having the certificate of registration issued under section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934) and otherwise entitled to accept public deposits as per paragraph 4(4) of these Directions, may open its branch or appoint agents if its
(a) NOF is up to Rs. 50 crore Within the State where its registered office is situated; and
(b) NOF is more than Rs. 50 crore and
its credit rating is AA or above
Anywhere in India
(ii) (a) for the  purpose of opening a branch, a non-banking financial company shall notify to the Reserve  Bank of its intention to open the proposed branch;
(b)  on  receipt  of  such  advice, the Reserve Bank may, on being satisfied that in the public interest or in the interest of the concerned non-banking financial company or for any other relevant reasons to be recorded, reject the proposal and communicate the same to the non-banking financial company;
(c) if no advice of rejection of the proposal under (b) above is communicated by the Reserve Bank within 30 days from the receipt of such advice, the non-banking financial company may proceed with its proposal.
4B Closure of branches
No non-banking financial company shall  close its branch/office without publishing such intention in any one national level newspaper and in one vernacular newspaper in circulation in the relevant place and without advising Reserve Bank of India, before ninety days of the proposed closure].
PART III - SPECIAL PROVISIONS
Information to be included in the Board's report
5.  (1) In every report of the Board of Directors laid before the company in a general  meeting  under  sub-section  (1)  of section 217 of the Companies Act, 1956 (1 of 1956), there shall be included in the case of a non-banking financial company, the following particulars or information, namely :-
  1. the total number of accounts of public deposit of the company which have not been claimed by the depositors or not paid by the company after the date on which the deposit became due for repayment; and
  2. the total amounts due under such accounts remaining  unclaimed or unpaid beyond the dates referred to in clause (i) as aforesaid.
(2) The said particulars or information shall be furnished with reference to the position as on the last day of the financial year to which the report relates and if the amounts remaining unclaimed or undisbursed as referred to in clause (ii) of the preceding sub-paragraph exceed in the aggregate a sum of rupees five lakhs, there shall also be included in the report a statement on the steps taken or proposed to be taken by the Board of Directors for the repayment of the amounts due to the depositors remaining unclaimed or undisbursed.
Safe custody of approved securities
6.  (1) every non-banking financial company shall -
(i) open a Constituent's Subsidiary General Ledger (CSGL) account with a scheduled commercial bank, or the Stock Holding Corporation of India Ltd. (SHCIL) or a dematerialized account with a depository through a depository participant registered with the Securities and Exchange Board of India and keep the unencumbered approved securities required to be maintained by it in pursuance of Section 45-IB of the Reserve Bank of India Act, 1934 (2 of 1934) and the Notification No. DFC.121/ ED(G)-98 dated January 31, 1998 in such CSGL account or dematerialised account;
(ii) designate one of the scheduled commercial banks, in the place where the registered office of the non-banking financial company is situated, as its designated banker  and entrust, in physical form, to such bank or the SHCIL the unencumbered term deposits in any scheduled commercial bank maintained by it in pursuance of Notification No. DFC.121/ED(G)-98 dated January 31, 1998 and such unencumbered approved securities which have not been dematerialised; and intimate the name and address of such scheduled commercial bank where it has opened its CSGL account or has held the securities in physical form, or the location of the SHCIL where it has opened its CSGL account or has held the securities in physical form or the depository (and the depository participant) where it has held its dematerialised account, in writing, to the Regional Office of the Reserve Bank of India under whose jurisdiction the registered office of the company is situated, as specified in Second Schedule hereto: 
Provided that where a non-banking financial company intends to entrust the securities specified in clause (ii)  above with the designated banker or SHCIL, at a place other than the place at which its registered office is located, it may do so with the prior approval, in writing, of the Regional Office of the Reserve Bank of India under whose jurisdiction the registered office of the company is situated, as specified in Second Schedule hereto:]
Provided further that the government securities held in the said CSGL account or dematerialised account, shall not be traded, either by entering into ready forward contracts, including reverse ready forward contracts, or otherwise, except, by following the procedure and to the extent, as hereinafter specified.]
(2) The securities mentioned in sub-paragraph (1) above shall continue to be kept as specified therein for the benefit of the depositors and shall not be withdrawn or encashed or otherwise dealt with by the non-banking financial company except for repayment to the depositors with the prior approval of Reserve Bank of India :
Provided that,
  1. a non-banking financial company may withdraw a portion of such securities in proportion to the reduction of its public deposits duly certified to that effect by its auditor;
  2. where the non-banking financial company intends to substitute such securities kept in physical form, it may do so by entrusting securities of equal value to the designated bank or SHCIL before such withdrawal; and]
  3. the market value of these securities shall, at no point of time, be less than the percentage of public deposits as specified in Notification No.DFC.121/ED(G)-98 dated January 31, 1998.]
(3) Where the non-banking financial company intends to trade, either by entering into ready forward contracts, including reverse ready forward contracts, or otherwise, in the government securities that are held in excess of the requirement under Section 45-IB of the Act and Notification No. DFC. 121/ED (G)-98 dated January 31, 1998, the same may be undertaken by opening a separate CSGL o dematerialised account for keeping such excess government securities.]
Employees Security Deposit
7. A non-banking financial company receiving any amount in the ordinary course of its business as security deposit from any of its employees for due performance of his duties shall keep such amount in an account with a scheduled commercial bank or in a post office in the joint names of the employee and the company on the conditions that -
  1. it shall not withdraw the amount without the consent in writing of the employee; and
  2. the amount shall be repayable to the employee along with interest payable on such deposit account unless such amount or any part thereof is liable to be appropriated by the company for the failure on the part of the employee for due performance of his duties.
Copies of balance sheet and accounts together with the Directors' report, auditors’ report,  notes on accounts and returns  to be furnished to the Reserve Bank
8. (1) Every non-banking financial company  accepting/holding public deposit shall deliver to the Reserve Bank of India  an audited balance sheet as on the last date of each financial year and an audited profit and loss account in respect of that year as passed by the company in general meeting together with a copy of the report of the Board of Directors laid before the company in such meeting in terms of section 217(1) of the Companies Act, 1956 (1 of 1956) within fifteen days of such meeting as also a copy of the report and the notes on accounts furnished by its Auditor.
Provision for submitting Auditor's Certificate
(2) Every non-banking financial company holding/accepting public deposits shall furnish to the  Reserve Bank of India along with a copy of the audited balance sheet as provided in sub-paragraph (1) above, a copy of the Auditor’s report to the Board of Directors and  a certificate from its auditor, to the effect that the full amount of liabilities to the depositors of the company, including interest payable thereon, are properly reflected in the balance sheet, and that the company is in a position to meet the amount of such liabilities to the depositors.
Returns to be submitted to the Reserve Bank  of  India
(3) Every non-banking financial company holding/accepting public deposits shall submit to the Reserve Bank  of India a  return furnishing the information specified in the First Schedule hereto, with reference to its financial position as on the date specified in the said Schedule.
“provided that with effect from June 30, 2011 such return shall be submitted quarterly online in the format available on https://cosmos.rbi.org.in ,within a period of 15 days from the close of the quarter.”
(4) Every non-banking financial company shall, not later than one month from the occurrence of any change in the following matters, shall intimate to the Reserve Bank of India:
  1. the complete postal address, telephone number/s and fax number/s of the registered/corporate office;
  2. the names and residential addresses of the directors of the company;
  3. the names and the official designations of its  principal officers;
  4. the specimen signatures of the officers  authorised to sign on behalf of the company;  and
  5. the names and office address of the auditors of the company.
Balance sheet, returns, etc. to be submitted to the Department of Non-Banking Supervision
(5) Any balance sheets, returns or information or intimation or statement required to  be submitted or furnished to the Reserve Bank of India in pursuance of these directions shall be submitted  or furnished to the Regional Office of the Department of Non-Banking  Supervision of the Reserve Bank of India within whose jurisdiction the registered office of the company is situated, as specified in the Second Schedule hereto.
Non-applicability of the Directions to certain types of non-banking financial companies
9. Nothing contained in paragraphs 4 to 8  of these directions shall be applicable to:
(1) an insurance company holding a valid certificate of registration issued under section 3 of the Insurance Act, 1938 (IV of 1938), or a stock exchange notified under section 4 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), or a stock broking company defined in section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);
(2) a loan company, an investment company, an asset finance company not accepting/holding any public deposit:
Provided that the company passes in the meeting of its board of directors within thirty days of the issue of these directions and thereafter within thirty days of the commencement of the next financial year and each subsequent financial year, a resolution to the effect that the company has neither accepted public deposit nor would accept any public deposit during the year.
(3) an investment company,
  1. which has acquired shares/securities of its own group/holding/ subsidiary companies only and such acquisition is  not less than  ninety per cent of its total assets at any  point of time;
  2. which does not trade in such shares/securities; and
  3. which does not accept/hold any public deposit :
Provided that the company passes in the meeting of its board of directors within thirty days of the issue of these directions and thereafter within thirty days of the commencement of each subsequent financial year a resolution  to the effect that the company has invested or would invest/hold its investments in the shares/securities of its group/holding/subsidiary companies of not less than 90 per cent of its assets and (name of each company to be specified), that it would not trade in such shares/securities and that it has neither accepted nor would accept any public deposit during the year.
[9A Nothing contained in paragraphs 4 to 7 shall apply to an NBFC  being a Government company as defined under section 617 of the Companies Act, 1956 (1 of 1956).]
Exemptions
10. The Reserve Bank of India may, if it considers necessary for avoiding any hardship or for any other just and sufficient reason, grant extension of time to comply with or exempt any company or class of companies from all or any of the provisions of these directions either generally or for any specified period subject to such conditions as the Reserve Bank of India may impose.
Saving of action taken or that may be taken for contravention of the Non-Banking Financial Companies (Reserve Bank) Directions, 1998
11. It is hereby clarified that the supersession of the Non-Banking Financial Companies (Reserve Bank) Directions, 1998 contained in Notification No.DFC.114/DG (SPT)-98 dated January 2, 1998 shall not in any way affect -
  1. any right, obligation or liability acquired, accrued or incurred thereunder;
  2. any penalty, forfeiture or punishment incurred or suffered in respect of any contravention committed thereunder; and
  3. any investigation, legal proceeding or action  in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment  taken or arising under the said directions,
and  any such investigation, legal proceeding or action may be instituted, continued, or enforced and any such penalty, forfeiture or punishment may be imposed as if those directions had not been superseded.
Applicability of the directions to companies other than those mentioned in paragraph 2(1)
12. The provisions of these directions, as in force for the time being, shall apply to or in relation to every company which is a financial institution but does not belong to any of the categories of the companies mentioned in sub- paragraph (1) of paragraph 2 of these directions or is not a miscellaneous non-banking company within the meaning of the Miscellaneous Non-Banking Companies (Reserve Bank) Directions, 1977 or is not a residuary non-banking company within the meaning of Residuary Non-Banking Companies (Reserve Bank) Directions, 1987 as they apply to or in relation to a loan company.
Sd/-
(S.P. TALWAR)
DEPUTY GOVERNOR 

Ozg NBFC Consultant

Ozg Center | Delhi | Mumbai | Chennai | Bangalore | Kolkata

Back Office Phone # 09811415831-37-61-72-84-92-94

W: nbfc.in | Email: ask@nbfc.in