s#pportin( prod#ctive econo$ic activit", s#ch as a#to$obiles, tractors, lathe $achines, (enerator sets, earth $ovin( and $aterial handlin( e8#ip$ents, $ovin( on own power and (eneral p#rpose ind#strial $achines. )rincipal b#siness for this p#rpose is defined as a((re(ate of financin( realph"sical assets s#pportin( econo$ic activit" and inco$e arisin( therefro$ is not less than ; $onths and $a6i$#$ period of ;< $onths. The" cannot accept deposits repa"able on de$and. 2o$e of the i$portant re(#lations relatin( to acceptance of deposits b" B0s are as #nder* i)
The B0s are allowed to acceptrenew p#blic deposits for a $ini$#$ period of 1> $onths and $a6i$#$ period of ;< $onths. The" cannot accept deposits repa"able on de$and. ii B0s cannot offer interest rates hi(her than the ceilin( rate prescribed b" RBI fro$ ti$e to ti$e. The present ceilin( is 11 per cent per ann#$. The interest $a" be paid or co$po#nded at rests not shorter than $onthl" rests. iii B0s cannot offer (iftsincentives or an" other additional benefit to the depositors.
R!= !0 B0 on Bankin( 0inancial o$panies B0s in India were havin( (olden da"s d#rin( 199
of so$e of the B0s. %oreover, d#e to this $an" weak B0s co#ld not pa" the heft" interest d#rin( the ind#strial slowdown d#rin( 199& brin(in( to an end the (olden period or otherwise of B0s. The ratin( a(encies down(raded $an" co$panies which was followed b" the RBI ti(htenin( the reso#rce raisin( and pr#dential nor$s in Fan#ar" 199?. Below I will $ention the recent re(#lations to which a B0 has to adher to* •
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%ini$#$ net owned f#nd of Rs.1<< crore The co$pan" sho#ld have $ade net profit as per last two "ears a#dited balance sheet The percenta(e of net )As to net advances of the B0 as per the last a#dited balance sheet sho#ld not be $ore than 3D The nondeposittakin( B0s B0s/ sho#ld have RAR of 1D or 15D, as applicable to the co$pan".
As reco(niCed b" RBI the specific roles of B0s- are* •
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/evelop$ent of sectors like Transport E Infrastr#ct#re 2#bstantial e$plo"$ent (eneration @elp E increase wealth creation Broad base econo$ic develop$ent Irreplaceable s#pple$ent to bank credit in r#ral se($ents $aor thr#st on se$i#rban, r#ral areas E first ti$e b#"ers #sers To finance econo$icall" weaker sections @#(e contrib#tion to the 2tate e6che8#er
h" there is a de$and for B0s- B0s provide pro$pt, tailor $ade service with least hassles. This $ore than co$pensates for the hi(her lendin( rates of B0s as co$pared to Banks E 0Is All c#sto$ers (et direct and eas" access to and individ#al attention of the top $ana(e$ent B0s cater to a class of borrowers who * •
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The Indian econo$" is (oin( thro#(h a period of rapid Gfinancial isation-. Toda", the Ginter$ediation- is bein( cond#cted b" a wide ran(e of financial instit#tion thro#(h plethora of c#sto$er friendl" financial prod#cts. The se($ent consistin( of onBankin( 0inancial o$panies B0s, s#ch as e8#ip$ent leasin(hire p#rchase finance co$panies, have $ade (reat strides in recent "ears and are $eetin( the diverse financial needs of the econo$". In this process, the" have infl#enced the direction of savin(s and invest$ent. The res#ltant capital for$ation is i$portant for o#r econo$ic (rowth and develop$ent. Th#s, fro$ both the $acro econo$ic perspective and the str#ct#re of the Indian financial s"ste$, the role of B0s has beco$e increasin( l" i$portant. It is interestin( to note that as at the end of %arch 199; the re(#lated deposits deposits which RBI re(#lates of 1<194 B0s a$o#nted to Rs.45,439 crore. The borrowin( of these co$panies stood at Rs.;>,995 crore. !ne of the $ost i$por tant co$ponent of these deposits borrowin(s is deposits fro$ p#blic in which RBI is $ore concerned. 2#ch deposits stood at Rs.1&,??3 crore e6cl#din( @0s which co$es o#t to 4.>5 per cent of the total deposits of sched#led co$$ercial banks. >. The $o$ent#$ of recent develop$ents in nonbankin( financial sector has evinced considerable debate. hile there is a class in the ind#str" stron(l" opposin( the stren(thenin( of re(#lator" fra$ework and foc#sin( closer s#pervisor" attention, ostensibl" in s#pport of principle of free $arket, the another #r(in( Reserve Bank to intervene and enhance the i$a(e 8#otient of the ind#str" so that a $oderate level of s#stainable (rowth is as s#red of. To appreciate and #nderstand the present predica$ent, it is better to look back to the histor" of the re(#lation of B0s. 3. To briefl" recapit#late, the sche$e of re(#lation of B0s ori(inated in $idsi6ties when s#dden #ps#r(e in deposit $obilisation b" onBankin( o$panies was noticed. @owever, the foc#s of re(#lation was $ainl" intended to ens#re that it serves as an ad#nct to $onetar" and credit polic" and also provides an indirect protection to the depositors. The foc#s contin#ed to be the sa$e till earl" 9
4. At the dawn of liberalisation era, the arasi$ha$ o$$ittee 1991 had broadl" to#ched #pon the role of B0s in the e$er(in( 0inancial sector and $ade certain val#able reco$$endations for their health" (rowth. The (eneral tone of the co$$ittee was that these co$panies sho#ld be enco#ra(ed to (row with correspondin( reinforce$ent of re(#lator" and s#pervisor" fra$e work. As a se8#el to arasi$ha$ o$$ittee, Reserve Bank had appointed a orkin( 'ro#p on 0inancial o$panies hair$an, /r. A.. 2hah to $ake an indepth st#d" of the role of B0s and s#((est re(#lator" and control $eas#res to ens#re health" (rowth and operation of these co$panies. The o$$ittee had $ade several reco$$endations with far reachin( i$plications. Acceptin( $ost of the reco$$endations of the o$$ittee, Reserve Bank had considered the Report as an Approach /oc#$ent for f#rtherance of the B0s sector. 2o$e of the $aor reco$$endations of the 'ro#p were relatin( to shift of re(#lator" approach fro$ the liabilit" to the asset side, introd#ction of sche$e of re(istration and entr" point nor$ with $ini$#$ net owned f#nd !0 of Rs.5< lakhs for e6istin(new B0s, iss#e of pr#dential nor$s for inco$e reco(nition, provisionin(, capital ade8#ac" etc., and a$end$ents to RBI Act, 1934 (ivin( enhanced power to RBI for better re(#lation of B0s. The reco$$endations of the co$$ittee were i$ple$ented in a phased $anner. hile the sche$e of re(istration was introd#ced in April 1993 for all B0s havin( !0 of Rs.5< lakhs and above, pr#dential nor$s (#idelines were iss#ed in F#ne 1994 for all re(istered B0s. These nor$s were $ore in the nat#re of (#ide lines which were not $andator" in the absence of necessar" stat#tor" powers. 2#bse8#ent to this, in April 1995, #nderscorin( the i$portance of settin( o#t a effective s#pervisor" fra$e work, an e6pert (ro#p #nder the hair$anship of 2hri ).R. Hhanna, %e$ber of the Advisor" o#ncil for the Board for 0inancial 2#pervision was appointed to desi(n an effective and co$prehensive s#pervisor" fra$ework for B0 sector. %ost of the reco$$endations of the o$$ittee have been accepted and a s#pervisor" fra$ework co$prisin( onsite inspection for bi((er co$panies and offsite s#rveillance s"ste$ for other co$panies has been desi(ned and the sa$e is bein( i$ple$ented in a phased $anner. the chan(es have the followin( obectives
hat is difference between banks E B0s B0s are doin( f#nctions akin to that of banks, however there are a few differences* •
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i a B0 cannot accept de$and deposits de$and deposits are f#nds deposited at a depositor" instit#tion that are pa"able on de$and i$$ediatel" or within a ver" short period like "o#r c#rrent or savin(s acco#nts. ii it is not a part of the pa"$ent and settle$ent s"ste$ and as s#ch cannot iss#e che8#es to its c#sto$ers and iii deposit ins#rance facilit" of /I' is not available for B0 depositors #nlike in case of banks.
hat are the different t"pes of B0s re(istered with RBI The B0s that are re(istered with RBI are* •
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i e8#ip$ent leasin( co$pan" ii hirep#rchase co$pan" iii loan co$pan" iv invest$ent co$pan".
ith effect fro$ /ece$ber ;, ><<; the above B0s re(istered with RBI have been reclassified as •
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i Asset 0inance o$pan" A0 ii Invest$ent o$pan" I iii oan o$pan"
A0 wo#ld be defined as an" co$pan" which is a financial instit#tion carr"in( on as its principal b#siness the financin( of ph"sical assets s#pportin( prod#ctive econo$ic activit", s#ch as a#to$obiles, tractors, lathe $achines, (enerator sets, earth $ovin( and $aterial handlin( e8#ip$ents, $ovin( on own power and (eneral p#rpose ind#strial $achines.
)rincipal b#siness for this p#rpose is defined as a((re(ate of financin( realph"sical assets s#pportin( econo$ic activit" and inco$e arisin( therefro$ is not less than ;
hat are the re8#ire$ents for re(istration with RBI A co$pan" incorporated #nder the o$panies Act, 195; and desiro#s of co$$encin( b#siness of nonbankin( financial instit#tion as defined #nder 2ection 45 Ia of the RBI Act, 1934 sho#ld have a $ini$#$ net owned f#nd of Rs >5 lakh raised to Rs > crore fro$ April >1, 1999. The co$pan" is re8#ired to s#b$it its application for re(istration in the prescribed for$at alon(with necessar" doc#$ents for bank-s consideration. The bank iss#es certificate of re(istration after satisf"in( itself that the conditions as en#$erated in 2ection 45IA of the RBI Act, 1934 are satisfied.
here one can find a list of re(istered B0s and instr#ctions iss#ed to B0s The list of re(istered B0s is available on the web site of Reserve Bank of India J 'et K#ote L and can be viewed at www.rbi.or(.in. The instr#ctions iss#ed to B0s fro$ ti$e to ti$e are also hosted at the above site. Besides, instr#ctions are also iss#ed thro#(h !fficial 'aCette notifications. )ress releases are also iss#ed to draw attention of the p#blicB0s.
an all B0s accept deposits and what are the re8#ire$ents for acceptin( p#blic deposits All B0s are not entitled to accept p#blic deposits. !nl" those B0s holdin( a valid certificate of re(istration with a#thorisation to accept p#blic deposits can accepthold p#blic deposits. The B0s acceptin( p#blic deposits sho#ld have $ini$#$ stip#lated net owned f#nd and co$pl" with the directions iss#ed b" the bank.
Is there an" ceilin( on acceptance of p#blic deposits hat is the rate of interest and period of deposit which B0s can accept Mes, there is ceilin( on acceptance of p#blic deposits. An B0 $aintainin( re8#ired !0RAR and co$pl"in( with the pr#dential nor$s can accept p#blic deposits as follows* •
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ate(or" of B0 eilin( on p#blic deposits A0s $aintainin( RAR of 15D witho#t credit ratin( A0s with RAR of 1>D and havin( $ini$#$ invest$ent (rade credit ratin( 1.5 ti$es of !0 or Rs 1< crore whichever is less 4 ti$es of !0 I with RAR of 15D and havin( $ini$#$ invest$ent (rade credit ratin( 1.5 ti$es of !0
)resentl", the $a6i$#$ rate of interest a B0 can offer is 11D. The interest $a" be paid or co$po#nded at rests not shorter than $onthl" rests. The B0s are allowed to acceptrenew p#blic deposits for a $ini$#$ period of 1> $onths and $a6i$#$ period of ;< $onths. The" cannot accept deposits repa"able on de$and.
hat are the salient feat#res of B0s re(#lations which the depositor $a" note at the ti$es of invest$ent 2o$e of the i$portant re(#lations relatin( to acceptance of deposits b" B0s are as #nder* •
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i The B0s are allowed to acceptrenew p#blic deposits for a $ini$#$ period of 1> $onths and $a6i$#$ period of ;< $onths. The" cannot accept deposits repa"able on de$and. ii B0s cannot offer interest rates hi(her than the ceilin( rate prescribed b" RBI fro$ ti$e to ti$e. The present ceilin( is 11 per cent per ann#$. The interest $a" be paid or co$po#nded at rests not shorter than $onthl" rests. iii B0s cannot offer (iftsincentives or an" other additional benefit to the depositors. iv B0s e6cept certain A0s sho#ld have $ini$#$ invest$ent (rade credit ratin(. v The deposits with B0s are not ins#red. vi The repa"$ent of deposits b" B0s is not (#aranteed b" RBI. vii There are certain $andator" disclos#res abo#t the co$pan" in the Application 0or$ iss#ed b" the co$pan" solicitin( deposit
hat is -deposit- and -p#blic deposit- Is it defined an"where The ter$ -deposit- is defined #nder 2ection 45 Ibb of the RBI Act, 1934. -/eposit- incl#des and shall be dee$ed alwa"s to have incl#ded an" receipt of $one" b" wa" of deposit or loan or in an" other for$ b#t does not incl#de* •
a$o#nt raised b" wa" of share capital, or contrib#ted as capital b" partners of a fir$
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a$o#nt received fro$ sched#led bank, cooperative bank, a bankin( co$pan", 2tate 0inancial orporation, I/BI or an" other instit#tion specified b" RBI a$o#nt received in ordinar" co#rse of b#siness b" wa" of sec#rit" deposit, dealership deposit, earnest $one", advance a(ainst orders for (oods, properties or services a$o#nt received b" a re(istered $one" lender other than a bod" corporate a$o#nt received b" wa" of s#bscriptions in respect of a -hit-. an" a$o#nt received fro$ financial instit#tions an" a$o#nt received fro$ other co$pan" as intercorporate deposit a$o#nt received b" wa" of s#bscriptions to shares, stock, bonds or debent#res pendin( allot$ent or b" wa" of calls in advance if s#ch a$o#nt is not repa"able to the $e$bers #nder the articles of association of the co$pan" a$o#nt received fro$ shareholders b" private co$pan" a$o#nt received fro$ directors or relative of the director of a B0 a$o#nt raised b" iss#e of bonds or debent#res sec#red b" $ort(a(e of an" i$$ovable propert" or other asset of the co$pan" s#bect to conditions the a$o#nt bro#(ht in b" the pro$oters b" wa" of #nsec#red loan a$o#nt received fro$ a $#t#al f#nd an" a$o#nt received as h"brid debt or s#bordinated debt an" a$o#nt received b" iss#ance of o$$ercial )aper.
Th#s, the directions have so#(ht to e6cl#de fro$ the definition of p#blic deposit a$o#nt raised fro$ certain set of infor$ed lenders who can $ake independent decision.
Are 2ec#red debent#res treated as )#blic /eposit If not who re(#lates the$ /ebent#res sec#red b" the $ort(a(e of an" i$$ovable propert" or other asset of the co$pan" if the a$o#nt raised does not e6ceed the $arket val#e of the said i$$ovable propert" or other asset are e6cl#ded fro$ the definition of -p#blic deposit- in ter$s of on Bankin( 0inancial o$panies Acceptance of )#blic /eposits Reserve Bank /irections, 199?. 2ec#red debent#res are debt instr#$ents and are re(#lated b" 2ec#rities E =6chan(e Board of India.
hether B0s can accept deposits fro$ RIs =ffective fro$ April >4, ><<4, B0s cannot accept deposits fro$ RI e6cept deposits b" debit to R! acco#nt of RI provided s#ch a$o#nt do not represent inward re$ittance or transfer fro$ R=0R B acco#nt. @owever, the e6istin( RI deposits can be renewed.
Is no$ination facilit" available to the /epositors of B0s Mes, no$ination facilit" is available to the depositors of B0s. The R#les for no$ination facilit" are provided for in section 45KB of the Reserve Bank of India Act, 1934. onBankin( 0inancial o$panies have been advised to adopt the Bankin( o$panies o$ination R#les, 19?5 $ade #nder 2ection 45NA of the Bankin( Re(#lation Act, 1949.
hat else sho#ld a depositor bear in $ind while depositin( $one" with B0s
hile $akin( deposits with a B0, the followin( aspects sho#ld be borne in $ind* •
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i )#blic deposits are #nsec#red. ii A proper deposit receipt which sho#ld, besides the na$e of the depositors state the date of deposit, the a$o#nt in words and fi(#res, rate of interest pa"able and the date of $at#rit" sho#ld be insisted. The receipt shall be d#l" si(ned b" an officer a#thorised b" the co$pan" in that behalf. iii The Reserve Bank of India does not accept an" responsibilit" or (#arantee abo#t the present position as to the financial so#ndness of the co$pan" or for the correctness of an" of the state$ents or representations $ade or opinions e6pressed b" the co$pan" and for repa"$ent of depositsdischar(e of the liabilities b" the co$pan".
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It is said that ratin( of B0s is necessar" before it accepts deposit Is it tr#e ho rates the$ An #nrated B0, e6cept certain Asset 0inance co$panies A0, cannot accept p#blic deposits. An e6ception is $ade in case of #nrated A0 co$panies with RAR of 15D which can accept p#blic deposit #p to 1.5 ti$es of the !0 or Rs 1< crore whichever is lower witho#t havin( a credit ratin(. A B0 $a" (et itself rated b" an" of the fo#r ratin( a(encies na$el", RI2I, AR=, IRA and 0IT@ Ratin(s India )vt. td.
hat are the s"$bols of $ini$#$ invest$ent (rade ratin( of different co$panies The s"$bols of $ini$#$ invest$ent (rade ratin( of the redit ratin( a(encies are*
a$e of ratin( a(encies * evel of $ini$#$ invest$ent (rade credit ratin( %I'R
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RI2I* 0A 0A %I:2 IRA* %A %A %I:2 AR=* AR= BBB 0/ 0IT@ Ratin(s India )vt. td* tAind0/ It $a" be added that A is not e8#ivalent to A, AA is not e8#ivalent to AA and AAA is not e8#ivalent to AAA.
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an a B0 which is "et to be rated accept p#blic deposit o, a B0 cannot accept deposit witho#t ratin( e6cept an =@) co$pan" co$pl"in( with pr#dential nor$s and havin( RAR of 15D, tho#(h not rated, $a" accept p#blic deposit #p to 1.5 ti$es of !0 or Rs 1< crore whichever is less. hen a co$pan"-s ratin( is down(raded, does it have to brin( down its level of p#blic deposits i$$ediatel" or over a period of ti$e If ratin( of a B0 is down(raded to below $ini$#$ invest$ent (rade ratin(, it has to stop acceptin( p#blic deposit, report the position within fifteen workin( da"s to the RBI and red#ce within three "ears fro$ the date of s#ch down(radin( of credit ratin(, the a$o#nt of e6cess p#blic deposit to nil or to the appropriate e6tent per$issible #nder para(raph 44 of onBankin( 0inancial o$panies Acceptance of )#blic /eposits Reserve Bank /irections, 199? however s#ch B0 can renew the $at#red p#blic deposits s#bect to repa"$ent stip#lations specified above and co$pliance with other conditions for acceptance of deposits.
In case a B0 defa#lts in repa"$ent of deposit what co#rse of action can be taken b" depositors
If a B0 defa#lts in repa"$ent of deposit, the depositor can approach o$pan" aw Board or ons#$er 0or#$ or file a civil s#it to recover the deposits.
hat is the role of o$pan" aw Board in protectin( the interest of depositors @ow one can approach it here a nonbankin( financial co$pan" fails to repa" an" deposit or part thereof in accordance with the ter$s and conditions of s#ch deposit, the o$pan" aw Board B either on its own $otion or on an application fro$ the depositor directs, b" order, the non bankin( financial co$pan" to $ake repa"$ent of s#ch deposit or part thereof forthwith or within s#ch ti$e and s#bect to s#ch conditions as $a" be specified in the order.
=6plain the ter$s -owned f#nd- and -net owned f#nd- in relation to B0s -!wned 0#nd- $eans a((re(ate of the paid#p e8#it" capital and free reserves as disclosed in the latest balance sheet of the co$pan" after ded#ctin( therefro$ acc#$#lated balance of loss, deferred reven#e e6pendit#re and other intan(ible assets. The a$o#nt of invest$ents of s#ch co$pan" in shares of its s#bsidiaries, co$panies in the sa$e (ro#p and all other B0s and the book val#e of debent#res, bonds, o#tstandin( loans and advances $ade to and deposits with s#bsidiaries and co$panies in the sa$e (ro#p is arrived at. The a$o#nt th#s calc#lated, to the e6tent it e6ceeds 1
hat are the responsibilities of the B0s acceptin(holdin( p#blic deposits with re(ard to s#b$ission of Ret#rns and other infor$ation to RBI The B0s acceptin( p#blic deposits sho#ld f#rnish to RBI* •
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i. A#dited balance sheet of each financial "ear and an a#dited profit and loss acco#nt in respect of that "ear as passed in the (eneral $eetin( to(ether with a cop" of the report of the Board of /irectors and a cop" of the report and the notes on acco#nts f#rnished b" its A#ditors ii. 2tat#tor" Ann#al Ret#rn on deposits B2 1 iii. ertificate fro$ the A#ditors that the co$pan" is in a position to repa" the deposits as and when the clai$s arise iv. K#arterl" Ret#rn on li8#id assets v. @alf"earl" Ret#rn on pr#dential nor$s vii. @alf"earl" A% Ret#rns b" co$panies havin( p#blic deposits of Rs >< crore and above or with assets of Rs 1<< crore and above irrespective of the siCe of deposits viii. %onthl" ret#rn on e6pos#re to capital $arket b" co$panies havin( p#blic deposits of Rs 5< crore and above and i6. A cop" of the redit Ratin( obtained once a "ear alon( with one of the @alf"earl" Ret#rns on pr#dential nor$s as at v above.
hat are the doc#$ents or the co$pliance re8#ired to be s#b$itted to the Reserve Bank of India b" the B0s not acceptin(holdin( p#blic deposits The B0s havin( assets siCe of Rs 1<< crore and above b#t not acceptin( p#blic deposits are re8#ired to s#b$it a %onthl" Ret#rn on i$portant financial para$eters of the co$pan". All co$panies not acceptin( p#blic deposits have to pass a board resol#tion to the effect that the" have neither accepted p#blic deposit nor wo#ld accept an" p#blic deposit d#rin( the "ear.
@owever, all the B0s other than those e6e$pted are re8#ired to be re(istered with RBI and also $ake s#re that the" contin#e to be eli(ible to re$ain Re(istered. 0#rther, all B0s incl#din( non deposit takin( sho#ld s#b$it a certificate fro$ their 2tat#tor" A#ditors ever" "ear to the effect that the" contin#e to #ndertake the b#siness of B0I re8#irin( holdin( of oR #nder 2ection 45IA of the RBI Act, 1934. RBI has powers to ca#se Inspection of the books of an" co$pan" and call for an" other infor$ation abo#t its b#siness activities. 0or this p#rpose, the B0 is re8#ired to f#rnish the infor$ation in respect of an" chan(e in the co$position of its board of directors, address of the co$pan" and its directors and the na$es and official desi(nations of its principal officers and the na$e and office address of its a#ditors. ith effect fro$ April 1, ><<& nondeposit takin( B0s with assets siCe of Rs 1<< crore and above have been advised to $aintain $ini$#$ RAR of 1
an a co$pan" prepa" its p#blic deposits
A B0 accepts deposits #nder a $#t#al contract with its depositors. In case a depositor re8#ests for pre$at#re pa"$ent, Reserve Bank of India has prescribed Re(#lations for s#ch an event#alit" in the onBankin( 0inancial o$panies Acceptance of )#blic /eposits Reserve Bank /irections, 199? wherein it is specified that B0s cannot (rant an" loan a(ainst a p#blic deposit or $ake pre$at#re repa"$ent of a p#blic deposit within a period of three $onths lockin period fro$ the date of its acceptance, however in the event of death of a depositor, the co$pan" $a", even within the lock in period, repa" the deposit at the re8#est of the oint holders with s#rvivor cla#se no$inee le(al heir onl" a(ainst s#b$ission of relevant proof, to the satisfaction of the co$pan". An B0 s#bect to above provisions, if it is not a proble$ co$pan", $a" per$it after the lockin period pre$at#re repa"$ent of a p#blic deposit at its sole discretion, at the rate of interest prescribed b" the Bank. A proble$ B0 is prohibited fro$ $akin( pre$at#re repa"$ent of an" deposits or (rantin( an" loan a(ainst p#blic depositsdeposits, as the case $a" be. The prohibition shall not, however, appl" in the case of death of depositor or repa"$ent of tin" deposits i.e. #p to Rs 1<,<<< s#bect to lockin period of 3 $onths in the latter case.
hat is the li8#id asset re8#ire$ent for the deposit takin( co$panies here these assets are kept /oes /epositors have an" clai$s on the$ In ter$s of 2ection 45IB of the RBI Act, 1934 the $ini$#$ level of li8#id asset to be $aintained b" B0s is 15 per cent of p#blic deposits o#tstandin( as on the last workin( da" of the second precedin( 8#arter.
!f the 15D, B0s are re8#ired to invest not less than 1
ter$ deposits with an" sched#led co$$ercial bank. Th#s, the li8#id assets $a" consist of (overn$ent sec#rities, (overn$ent (#aranteed bonds and ter$ deposits with an" sched#led co$$ercial bank. The invest$ent in (overn$ent sec#rities sho#ld be in de$aterialised for$ which can be $aintained in onstit#ents- 2#bsidiar" 'eneral ed(er 2' Acco#nt with a sched#led co$$ercial bank 2B 2tock @oldin( orporation of India i$ited 2@I. In case of 'overn$ent (#aranteed bonds the sa$e $a" be kept in de$aterialised for$ with 2B2@I or in a de$aterialised acco#nt with depositories Jational 2ec#rities /epositor" td. 2/entral /epositor" 2ervices India td. /2L thro#(h a depositor" participant re(istered with 2ec#rities E =6chan(e Board of India 2=BI. @owever in case there are 'overn$ent bonds which are in ph"sical for$ the sa$e $a" be kept in safe c#stod" of 2B2@I. B0s have been directed to $aintain the $andated li8#id asset sec#rities in a de$aterialised for$ with the entities stated above at a place where the re(istered office of the co$pan" is sit#ated. @owever, if a B0 intends to entr#st the sec#rities at a place other than the place at which its re(istered office is located, it $a" do so after obtainin( in writin( the per$ission of RBI. It $a" be noted that the li8#id assets in approved sec#rities will have to be $aintained in de$aterialised for$ onl". The li8#id assets $aintained as above are to be #tilised for pa"$ent of clai$s of depositors. @owever, deposit bein( #nsec#red in nat#re depositors do not have direct clai$ on li8#id assets.
hat is a Resid#ar" onBankin( o$pan" RB In what wa" it is different fro$ other B0s
Resid#ar" onBankin( o$pan" is a class of B0 which is a co$pan" and has as its principal b#siness the receivin( of deposits, #nder an" sche$e or arran(e$ent or in an" other $anner and not bein( invest$ent, asset financin(, loan co$pan". These co$panies are re8#ired to $aintain invest$ents as per directions of RBI, in addition to li8#id assets. The f#nctionin( of these co$panies is different fro$ those of B0s in ter$s of $ethod of $obilisation of deposits and re8#ire$ent of deplo"$ent of depositorsf#nds. @owever, )r#dential or$s /irections are applicable to these co$panies also.
