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‘Govts acting against cos accepting deposits sans RBI nod’

RBI has identified several financial companies accepting deposits from public without authorisation from it and state governments are in the process of taking action against them, RBI Deputy Governor R Gandhi said on Sunday.

' has come to the notice of the bank that there are financial companies that have been accepting deposits from the public without any authorisation from the bank,' said in his 110th Foundation Day address of state-based City Union Bank here.

'These have been identified and respective state governments are in the process of taking suitable action under the State Protection of the Interest of Depositors' Act', he said.

Noting that debentures and bank finances are two main sources of funds for Non-Banking Finance Companies, he said RBI in the past observed an unhealthy and a sudden spurt in debentures issuance under the private placement route.

'On-site inspections of (NBFC) companies also showed that the debentures were accepted by the companies and were being issued to walk in customers. As NBFCs were accepting wholesale funds, RBI took action to prevent retail participation by stipulating minimum subscription amount and preventing NBFCs from lending against the security of their own debentures.

'This while curbing the undesirable practices has constrained the resource raising ability of NBFCs. The bank is in the process of aligning largely with the Debenture Regulations with that of Companies Act, 2013,' he said.

On some challenges faced by RBI, he said the menace of 'unincorporated' bodies and 'fly-by-night' operators accepting deposits needed to be addressed and they were strengthening the market intelligence efforts and inter-regulatory coordination mechanism.

Gandhi said state-Level coordination committees have been strengthened with cief secretaries presiding over them. The frequency of such meetings had also been increased.

He said RBI was looking into the interest evinced by some states to act as regulator for the financial sector.
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