Insurance coverage for deposits in non-banking finance companies is unlikely to be provided as Reserve Bank of India has expressed reservations over the move.
An internal working group, headed by N Sadasivan, RBI ED, and another one (WG-II), headed by R Beri, New India Assurance CMD, recommended against providing insurance cover to deposits of NBFCs, the Centre said in its Action Taken Report on the suggestions of Joint Parliamentary Committee that probed the stock scam of 2001.
After analysing various parameters including the risk profile of NBFCs, level of regulatory compliance, problem of moral hazards and market discipline, the first group headed by Sadasivan had recommended that there was no need to provide insurance cover to NBFC deposits.
The second working group, with external members and set up to examine the recommendation of the first committee, had agreed with the Sadasivan committee's observation.
"The report of IWG, which is well-documented, has taken all the relevant issues into due consideration before arriving at the conclusion and its recommendations are acceptable," the ATR said, adding, "RBI is in agreement with the recommendations of WG-II."
