Ordinance On Nbfcs To Be Amended
The Reserve Bank of India (RBI) is amending the recently issued ordinance banning unincorporated financial intermediaries from accepting deposits for the purpose of lending. The changes in the ordinance will take place when the bill is moved before Parliament.
The apex bank had recently banned unincorporated non-banking finance companies and unregistered finance companies from accepting deposits. The regulatory authoritys move followed defaults by several companies in interest payments as well as repayment of the principal amount. Moreover, many of these companies were subsequently not traceable.
Under the new norm, the central bank has deterred unincorporated companies from accepting deposits without its prior permission.
Meanwhile, various trade bodies expressed concern about the recent amendment of section 45S of the RBI Act, 1934. These bodies fear that the amendment will have an adverse effect on their commercial and business activities as they will not be able to borrow from individuals for business.
However, the RBI has clarified that the intention of the amendment is not to prohibit individuals and partnership firms from accepting deposits or borrowings from individuals for business purpose.