Big action by RBI: License of 5 NBFCs cancelled, 8 companies surrendered registration, know what will be the impact on customers

The Reserve Bank of India (RBI) has once again taken strict steps to ensure financial discipline and adherence to rules in the non-banking financial sector (NBFC Sector) of the country. The central bank has completely canceled the ‘Certificate of Registration’ (CoR) of 5 non-banking finance companies (NBFCs) for violating stringent regulatory provisions. Along with this, 8 other financial companies have voluntarily surrendered their registration certificates to the central bank for various commercial and strategic reasons. After this double action, the right of all these 13 companies to do financial business as registered NBFCs has ended. This action is important for all those who are associated with these companies through loans or financial services.

RBI has canceled the licenses of 5 NBFCs with immediate effect, using the powers conferred under Section 45-IA (6) of the Reserve Bank of India Act, 1934. These mainly included ignoring rules, not meeting statutory standards and failure to conduct related financial activities.

The list of companies whose registrations have been canceled is as follows:

1. Dar’s Financial Services Pvt Ltd

2. Rolta Holding and Finance Corporation Pvt Ltd

3. Vasudeo Securities Pvt Ltd

4. Parsoli Corporation Ltd

5. AC Choksi Financial Services Pvt Ltd

After the license is revoked, these companies can no longer run any type of Non-Banking Financial Institution (NBFI) activities.

According to RBI, the 8 companies that have surrendered their licenses have different legal and business reasons behind their decision:

• Reasons for complete exit from NBFI business: Four companies themselves decided to withdraw from this sector—

  
  

  • Anupam Mercantile Ltd

  • Grand Motor and Finance Pvt Ltd

  • Sky Limit International Finance Ltd

  • ASA International India Microfinance Ltd

• Reasons for merger or cessation of legal existence: The separate legal existence of two companies ceases due to amalgamation, merger, dissolution or strike-off.

  
  

  • Shivam Securities Pvt Ltd

  • April Investment and Finance Pvt Ltd

• On meeting the standards for un-registered category: The two companies no longer require separate NBFC licenses—

  
  

  • Anagram Industries Ltd: Being within the scope of Un-Registered Core Investment Company (CIC) regulations.

  • CDN Finance Pvt Ltd: Due to meet the standards of unregistered Type-1 NBFC.

As soon as the news of RBI canceling the license of any NBFC or surrender of the company comes out, many questions arise in the minds of common consumers and borrowers. It is extremely important for customers to understand the legal and financial situation in this situation:

• The requirement to repay the loan will remain: If a customer has taken a personal, business, vehicle or gold loan from these companies, cancellation of the license does not at all mean that the loan has been waived off. Your loan agreement is a valid legal contract. You have to pay your scheduled EMI on time. If any other institution or bank acquires this loan book, payment will have to be made on the new channel after receiving the official notification.

• Keep documents safe: Customers having loans with these companies should immediately download and keep all their loan agreements, EMI payment receipts, NOCs and account statements safe.

• Caution regarding deposits: Unlike banks, the government insurance cover of up to ₹5 lakh of DICGC is not applicable on fixed deposits (FD) deposited in NBFCs. If any affected institution has public deposits, depositors should immediately contact the liquidator or official address of the company to know the process of refund of their principal and interest.

From time to time, the Reserve Bank of India cautions consumers to check the authenticity of any financial institution, online loan app or private finance company before starting a transaction with it. Some precautions should be taken for this:

• The updated list of all registered and valid NBFCs is publicly available on the official website of RBI (rbi.org.in).

• Before investing in any company or taking a big loan from it, check whether its ‘Certificate of Registration’ is active or not.

• Companies whose license has been canceled cannot legally issue any new loans nor accept any new deposits from the general public. If any such company offers a new financial service, the same can be reported directly on the ‘Sachet’ portal of the central bank.