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The Reserve Bank of India (the Bank) issued Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016, after determining that it was necessary in the public interest and in order to enable the Bank to regulate the credit system to benefit the nation.
On their website or in their office, NBFCs must prominently display the (COR) Certificate of Registration granted by the Reserve Bank. This certificate should also state that the NBFC has been expressly approved to receive deposits by RBI. According to RBI guidelines, NBFCs that accept public deposits are required to abide by specific regulations regarding the deposits that depositors make available to them. One of these regulations requires NBFCs to inform depositors of the deposit’s maturity date, which this blog discusses.
The term deposit is defined under section 45-I (bb) of the Reserve Bank of India Act, 19341 in the following way:
Deposit includes and will always be considered to have included any receipt of money in the form of a loan, deposit, or other form but does not include-
Regardless of the method, a company may receive funds; however, some types of funds may be excluded as decided in agreement with the Reserve Bank of India.
Strict guidelines are in place by the RBI for non-banking financial institutions. A small mistake could result in a harsh penalty or the license being suspended.
The non-banking financial company is required to inform the depositor of the deposit’s maturity and other pertinent information at least two months prior to the date of maturity of the deposit.
Suppose a non-banking financial institution allows an existing depositor to extend their deposit before it matures to profit from a higher interest rate. In that case, they must pay the depositor the higher rate of interest provided that, among other things:
In accordance with the other guidelines, the deposit is renewed in the following ways:
According to regulation 41 of the Master Direction Non-Banking Financial Companies Acceptance of Public Deposit (Reserve Bank) Direction, 2016, the non-banking finance company shall comply with the reporting requirements for NBFC-D as prescribed by the Department of Non-Banking Supervision.
NBFCs should notify the depositors well in advance of their maturity for a number of reasons:
Overall, NBFCs’ advance notice of maturity is advantageous to both the NBFC and the depositors. It enables informed decisions on the part of depositors, ensures adherence to regulatory requirements, and supports efficient relationships with the NBFC and the depositor.
Read our Article:Restriction on acceptance of public deposits by NBFC
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