RBI suspended licence of 7 Non-Banking Finance Companies (NBFCs)

The Reserve Bank of India (RBI) suspended licences of seven non-banking financial companies (NBFCs), some for being dormant and some for either not carrying out its principal business or not fulfilling various norms including minimum net owned funds according to the directions or orders issued by RBI under RBI Act, 1934.

The seven NBFCs whose licences were suspended are

1. Religare Finance
2. Artisans Micro Finance
3. Eden Trade & Commerce
4. RCS Parivar Finance
5. Nott Investments
6. Dewra Stocks & Securities
7. Swetasree Finance

• There are around 12,000 NBFCs in the system currently.
• The Reserve Bank of India is entrusted with the responsibility of regulating and supervising the Non-Banking Financial Companies that meet the 50-50 criteria of principal business, by virtue of powers vested in Chapter III B of the Reserve Bank of India Act, 1934.
• Also as per the rules if any NBFC do not carry out its principal business according to the directions or orders issued by RBI under the act, is eligible for penal action that can also result in cancelling the Certificate of Registration issued to that particular NBFC.

Important Facts about NBFCs:

• A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956, whose principal business is lending, investments and receiving deposits.
• NBFCs cannot accept demand deposits.
• NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself.
• Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available to depositors of NBFCs, unlike in case of banks.