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May 26, 2000

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Larissa Fernand

If you are planning to invest in a non-banking finance company (NBFC), here are a few facts you should well be aware of.

  • Invest in only those NBFCs which are registered with and have the approval of the Reserve Bank of India (RBI), for only these can accept public deposits
  • Ensure that the NBFC has a track record of not less than 2 years
  • Check the credit rating given to the NBFC
  • Ensure that the NBFC has been making a profit
  • Check that the NBFC has no overdue deposits, except unclaimed, in its books
  • See that the NBFC has complied with RBI regulations and stated this in its advertisement and deposit application form
  • Note that registration of an NBFC with the RBI merely authorises the company to carry on its financial business and is not a guarantee for repayment of deposits by the NBFC
  • Keep in mind that NBFCs are not allowed to use the name of the RBI in any manner
  • Remember, NBFC deposits are not insured
  • NBFC deposits are not backed by security
  • No official agency guarantees or undertakes the repayment of the deposit or interest
  • NBFCs cannot offer an interest rate of more than 16 per cent per annum on public deposits
  • NBFCs cannot offer more than 2 per cent brokerage
  • NBFCs cannot offer gifts or incentives
  • NBFCs cannot accept deposits for less than 12 months
  • NBFCs cannot offer deposits for more than 60 months
  • All depositors must be issued proper receipts for deposits
What happens if you have already invested in an NBFC and the company has refused to return your principal?
In the case of default of repayment of the matured deposit, you will have to approach the Company Law Board (CLB) which has jurisdiction over that particular NBFC. That means, you will have to check out whether it is the CLB in Bombay, Calcutta, Madras or Delhi.

Under section 45QA of the Reserve Bank of India Act, 1934, the CLB has the power to direct defaulting NBFCs to make payments to their depositors.

Bombay
2nd floor
NTC House
15, Narottam Morarji Marg
Ballard Estate
Bombay 400038

Calcutta
Eastern Region Bench
6th floor
9, Old Port Office Street
Calcutta 700001

Madras
A-wing
5th floor
Block 8, No 6
Shakti Bhavan
Haddows Road
Madras 600006

New Delhi
Northern Region
5th floor
Shastri Bhavan
Dr Rajendra Prasad Road
New Delhi 110001

Another option would be to approach the Consumer Disputes Redressal Forum.

Bangalore
Karnataka Consumers Forum
No 9
Karnic Street
Shankapuram
Bangalore 560004

Karnataka Consumer Service Society
32-A, Benson Cross Road
Benson Town
Bangalore 560046

Bombay
Investors Grievance Forum
53, Hanumab Bldg
308 Bazar Gate
Fort, Bombay 400001

Consumer Guidance Society of India
Hutment J
Mahapalika Marg
opp Cama Hospital
Bombay 400001

Calcutta
Consumers' Action Forum
5/1 Red Cross Place
Calcutta 700062

Madras
Federation of Consumer Organisations - TN
32-A, 1st floor
Daniel Thomas Nagar
Vallam Road
Tanjore 613007

New Delhi
Consumer Service Society
148, Jor Bagh
New Delhi 110003

Indian Federation of Consumer Organisations
231, Jor Bagh
New Delhi 110003

For an up-to-date list of NBFCs, which have been granted the Certificate of Registration or whose applications have been rejected, visit the RBI site at www.nbfclist.rbi.org.in

There is no point in approaching the RBI since the central bank will direct you to the CLB or the consumer courts. Another option would be to register a criminal complaint with the Economic Offences Wing (EOW) of the city police. But here, too, you will meet with reluctance and probably be directed to the civil court.

If the company delays repayment beyond the date of maturity, it is obliged to pay you interest for the period of delay.
And if the NBFC hands over a cheque which bounces, you should immediately notify the company in writing and deposit it again. Should it happen for the second time, lodge a complaint at the nearest police station.

For bounced cheques, you can file a criminal suit against the company directors under section 138 of the Negotiable Instruments Act and even ask for damages.

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