RBI directive on acceptance of deposit by Muthoot
Fincorp Ltd. (MFCL) and Manappuram Finance Ltd.
NBFC
Deposit Scheme
The Reserve Bank of India has directed two
Non-Banking Financial Companies (NBFCs), viz., Muthoot Fincorp Ltd.
(MFCL) and Manappuram Finance Ltd. (MAFIL) to stop allowing the use
of its premises / branches to accept deposits from public by their
associate unincorporated bodies.
Muthoot
Estate Investment (MEI), was collecting public deposits through the branches of
MFCL located in Kerala, which is a violation of the provisions of section 45-S
of the RBI Act, 1934. The Manappuram Agro Farms (MAGRO), a sole proprietary
concern of Shri V.P. Nandakumar (Executive Chairman of MAFIL) was accepting
fresh deposits from the public. MAFIL, which was earlier a deposit taking
(Category ‘A’) company, became a non-deposit taking NBFC in March, 2011.
However, its maturing deposits were being renewed with MAGRO. Both these
actions were in violations of section 45-S of RBI Act, 1934.
In the case of the MEI, total amount of deposits from
the public and outstanding as on 31.01.2012 was Rs. 1,913 crore. Out of these
unauthorized deposits accepted by the unincorporated body, an amount of Rs.
1,173 crore was outstanding as on 30.06.2013. RBI has issued a press release and
an advertisement in local newspapers informing and cautioning the
public that it was not allowed to raise deposits under the provisions of the
RBI Act. RBI has issued a show cause notice to MFCL under section 45-IA of the
RBI Act. RBI has also referred the matter of deposit collection by MEI to State
Government of Kerala for appropriate action at their end under Chapter IIIC of
the RBI Act, 1934 as the State has necessary machinery and reach for action.
RBI
had issued directions to the MFCL under section 45-L of the RBI Act, 1934 to
desist from associating itself, its premises, branches or officials
in any manner with MEI in accepting deposits from the public.
As
regards MAGRO, out of Rs. 143.85 crores of public deposits held by MAGRO as on
29.12.2011, there are currently 506 customers with Rs. 93 lakhs in outstanding
deposits.
A show cause notice was issued to MAFIL on 07.05.2013
for cancellation of its Certificate of Registration under the
provisions of section 45-IA (6) of the RBI Act, 1934. Based on the company’s
reply and the findings of the scrutiny thereon, it was concluded that MAFIL has
taken steps for disassociating its name, officials, etc. from MAGRO and other
promoter group entities. At present, MAGRO does not have presence in any of the branches of
MAFIL. Further, an amount of Rs. 119.18 crore was transferred to an escrow
account maintained with Punjab National Bank towards repayment of
deposits. At present, the remaining amount of outstanding deposits is being
paid out of this escrow account.
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