West Bengal's saving scheme could face RBI opposition

The state govt has failed in making any blueprint for the scheme

About two months earlier, the West Bengal government had decided to start its own savings scheme, to protect small investors from unscrupulous deposit-raising entities. However, the plan is likely to be affected by the Reserve Bank of India’s (RBI) opposition to non-banking entities raising deposits.

Two months after the announcement, the state government has not even prepared the blueprint for the scheme. The biggest hurdle for the West Bengal government comes from RBI, which has already told it to convert two of its existing deposit-taking non-banking finance companies (NBFCs) into non-deposit taking entities.

“The small saving scheme has not yet been finalised. No blueprint has been prepared, neither the bottlenecks evaluated,” said a state government official. Two arms of the state government that are entitled to raise deposits are West Bengal Infrastructure Development Corporation (WBIDC) and West Bengal Infrastructure Development Finance Corporation (WBIDFC). None of the two has raised any deposits from the public so far. However, they are entitled to raise deposits, subject to conditions laid down by RBI.

Recently, WBIDFC passed a resolution to not accept deposits in 2013-14 as well.

“So far, we have not received any official communication from the state government on converting into non-deposit taking entity. However, our board has already taken the decision to not raise deposit for 2013-14,” said A K Das, managing director, WBIDFC. If the state government plans to raise deposits, it has to be routed through either of the two NBFCs. Otherwise, the state would need special permission from the Centre.

RBI’s opposition to non-banking entities raising deposits was underlined in a recent statement by RBI governor D Subbarao: “Deposit taking should eventually be restricted only to banks, which are tightly regulated. Deposit collection by non-banking companies should be gradually minimised, and eventually eliminated.”

Earlier, the West Bengal government had announced a Rs 500 crore fund to compensate investors of the Saradha group. Towards this, the state government had imposed a higher tax on cigarette. West Bengal has a debt-burden of Rs 2 lakh crore.