RBI cancels registration of 32 Non banking Financial Institutions from West Bengal, Gujarat and UP

 

 

Mumbai, January 8: The Reserve Bank of India has cancelled the Certificates of Registration of as many as 32 Non-Banking Financial Companies (NBFCs) today under the Reserve Bank of India Act, 1934. Exercising the powers conferred under section 45-IA (6) of the Act, RBI urged to say that these companies shall not conduct  non banking financial business here in after.

 

Of 32 NBFCs, RBI cancelled certificates of around 26 companies from West Bengal and rest belonging to Uttarakhand, Uttar Pradesh, Gujarat and New Delhi. Earlier in the month of December, the Central Bank of India had denied the registrations of roundly 31 NBFCs.

 

The move comes days after the central bank eased liquidity norms for banks in order to release additional funding for NBFCs. NBFCs have been under pressure recently due to fears of a liquidity crisis, high valuations and asset liability mismatches.

 

According to the RBI norms, no Non-banking Financial company can commence or carry on business of a non-banking financial institution without obtaining a certificate of registration from the Bank and having a Net Owned Funds of ₹ 25 lakhs. However, in terms of the powers given to the Bank, to obviate dual regulation, certain categories of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI.

 

The probable reason for the cancellation of registrations of these can be estimated to be violation of the above stated norms as per the Act. Also the Reserve Bank's overarching concern while supervising any financial entity is protection of depositors' interest. Depositors place deposit with any entity on trust unlike an investor who invests in the shares of a company with the intention of sharing the risk as well as return with the promoters. Protection of depositors' interest thus is supreme in financial regulation, which can be one of the prime base acting.