Nbfcs Asked To Submit 3-Yr Registration Plan

CRB group collapse update

The Reserve Bank of India (RBI) has asked non-banking finance companies (NBFCs) to present their business plans for three years if it wants fresh registration under the amended RBI Act.

The Act has made it mandatory for companies to seek fresh registration if they want to continue in business. Companies incorporated before January 9, 1997, having net-owned funds (NOF) of less than the prescribed amount of Rs 25 lakh as on the date of application, will have to furnish a time bound programme as to how they propose to attain the minimum NOF of Rs 25 lakh.

 

The detailed business plans which are to be presented along with the registration form will include details pertaining to the thrust of the company, the market segment in which the company will be operating, and the projection of investments and income for the next three years.

Following the CRB episode, RBI has been tightening reins on NBFCs. Officials say RBI has been communicating with NBFCs practically on a daily basis, asking them to apply for registration on time.

Other details that NBFCs will have to provide include details regarding their adherence to prudential norms; management practices; certified copies of up-to-date memorandum and articles of association of the company; certified copies of certificate of incorporation and certificate of commencement of business; and, in case of companies already in existence, a copy each of the profit and loss account and audited balance sheet for the last three years, if available.

The information will enable RBI to have a better understanding of the sector and the players. It will also enable RBI to categorise various players according to operations.

According to RBI deputy governor S P Talwar, the central bank will keep a watch on the operations of NBFCs through regular inspections once the registration process is complete. It will also maintain a complete data base on these companies. This will work towards avoiding a repeat of the CRB capital markets fiasco.

According to NBFC officials, the thrust of RBI now is on improving transparency in the operations of NBFCs. It is considering further prudential steps which will enable them to achieve transparency.

RBI has also asked NBFCs to provide details of defaults in timely repayment of deposit and payment of interest, if any. The apex bank has asked NBFCs to provide it with a list of all such pending cases along with the action taken in respect of each case.

The NBFC should also submit a list containing the details of all the court cases pending against it, including those pending in consumer fora, pertaining to its deposit acceptance activities.

RBI has also asked whether the company has committed any default in repayment of any loan, advance or any other credit facility availed from any bank.

RBI will issue a certificate of registration under Section 45-1A of the Reserve Bank of India Act, 1934 once it is satisfied with the registration.