Check before depositing money with NBFCs: RBI

The central bank cautions investors to carefully evaluate investment decisions

With a spate of financial scams, the Reserve Bank of India today cautioned investors to carefully evaluate investment decisions, including making deposits with non-banking finance companies (NBFCs). It regulates these and has authorised only a few NBFCs to accept deposits. The list of those authorised are on its website and people should check this, it cautioned.

This advisory was issued by the central bank as part of a periodic series of ‘Frequently Asked Questions’. These seek to explain the various kinds of financial entities and the regulations governing these.

In the latest one, RBI has warned not to fall prey to fictitious offers promising unsustainable returns by individuals, unincorporated bodies and companies. Currently, the maximum interest an NBFC can pay to a depositor should not exceed 12.5 per cent. The RBI keeps changing these rates, depending on the macro economic environment.

The public can register complaints with the local police or their Economic Offences Wing if some financial entity is found conducting business unauthorisedly or does not repay deposits. RBI is also categorical in saying it does not regulate chit fund activities or those of ‘collective investment schemes’.