RBI bars Sahara India Financial from accepting public deposits
June, 05th 2008
Sahara India Financial Corporation (SIFCL), the largest deposit-taking non-banking finance company in the country, has been barred by the Reserve Bank of India from accepting public deposits with immediate effect.
The company has also been told to repay the existing deposits as and when they mature.
SIFCL, part of the highly influential Sahara group which has interests in mutual funds, insurance, real estate and media, has been found guilty of violating various regulatory norms.
According to a statement issued by RBI, on Wednesday, the violations include non-payment of minimum rate of interest prescribed for RNBCs (residuary non-banking company), non-maintenance of stipulated asset-liability match, violation of Know Your Customer norms for opening deposit accounts, not informing depositors in time about the maturity of their deposits, and non-repayment of deposits on maturity.
Currently, SIFCL, a residuary NBFC, has a huge deposit base of close to Rs 18,000 crore. Asked to repay
RBI has directed SIFCL to repay the deposits as and when they mature and not to treat non-payment of instalments under any running daily deposit or recurring deposit schemes by depositors as a default.
The company is also liable to pay the agreed rate of interest on the amounts actually held by it for the entire term of the deposit as if there was no default, RBI said.
RBI had earlier issued a show-cause notice to SIFCL on violation of various regulations. However, despite the warning, the company continued to violate the guidelines, RBI said.
An RNBC is a non-banking financial company that is wholly dependent on public deposits. Other NBFCs depend on market borrowings and bank finance also.
According to information from the companys Web site, SIFCL, set up in 1987, has a depositor base of 4.25 core and 1,508 service centres.
Apart from Sahara, the other two RNBCs operating in India are the Kolkata-based Peerless General Finance and Investment Company and Disari India Savings and Credit Corporation.