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Larissa Fernand

If you are planning to invest in a non-banking finance company (NBFC), here are a few facts you should well be aware of.

• Invest in only those NBFCs which are registered with and have the approval of the Reserve Bank of India (RBI), for only these can accept public deposits
• Ensure that the NBFC has a track record of not less than 2 years
• Check the credit rating given to the NBFC
• Ensure that the NBFC has been making a profit
• Check that the NBFC has no overdue deposits, except unclaimed, in its books
• See that the NBFC has complied with RBI regulations and stated this in its advertisement and deposit application form
• Note that registration of an NBFC with the RBI merely authorises the company to carry on its financial business and is not a guarantee for repayment of deposits by the NBFC
• Keep in mind that NBFCs are not allowed to use the name of the RBI in any manner
• Remember, NBFC deposits are not insured
• NBFC deposits are not backed by security
• No official agency guarantees or undertakes the repayment of the deposit or interest
• NBFCs cannot offer an interest rate of more than 16 per cent per annum on public deposits
• NBFCs cannot offer more than 2 per cent brokerage
• NBFCs cannot offer gifts or incentives
• NBFCs cannot accept deposits for less than 12 months
• NBFCs cannot offer deposits for more than 60 months
• All depositors must be issued proper receipts for deposits

Under section 45QA of the Reserve Bank of India Act, 1934, the CLB has the power to direct defaulting NBFCs to make payments to their depositors.

Bombay 2nd floor NTC House 15, Narottam Morarji Marg Ballard Estate Bombay 400038 Calcutta Eastern Region Bench 6th floor 9, Old Port Office Street Calcutta 700001 Madras A-wing 5th floor Block 8, No 6 Shakti Bhavan Haddows Road Madras 600006 New Delhi Northern Region 5th floor Shastri Bhavan Dr Rajendra Prasad Road New Delhi 110001

Another option would be to approach the Consumer Disputes Redressal Forum.

Bangalore Karnataka Consumers Forum No 9 Karnic Street Shankapuram Bangalore 560004 Karnataka Consumer Service Society 32-A, Benson Cross Road Benson Town Bangalore 560046 Bombay Investors Grievance Forum 53, Hanumab Bldg 308 Bazar Gate Fort, Bombay 400001 Consumer Guidance Society of India Hutment J Mahapalika Marg opp Cama Hospital Bombay 400001 Calcutta Consumers' Action Forum 5/1 Red Cross Place Calcutta 700062 Madras Federation of Consumer Organisations - TN 32-A, 1st floor Daniel Thomas Nagar Vallam Road Tanjore 613007 New Delhi Consumer Service Society 148, Jor Bagh New Delhi 110003 Indian Federation of Consumer Organisations 231, Jor Bagh New Delhi 110003

For an up-to-date list of NBFCs, which have been granted the Certificate of Registration or whose applications have been rejected, visit the RBI site at www.nbfclist.rbi.org.in

There is no point in approaching the RBI since the central bank will direct you to the CLB or the consumer courts. Another option would be to register a criminal complaint with the Economic Offences Wing (EOW) of the city police. But here, too, you will meet with reluctance and probably be directed to the civil court.

If the company delays repayment beyond the date of maturity, it is obliged to pay you interest for the period of delay.
And if the NBFC hands over a cheque which bounces, you should immediately notify the company in writing and deposit it again. Should it happen for the second time, lodge a complaint at the nearest police station.

For bounced cheques, you can file a criminal suit against the company directors under section 138 of the Negotiable Instruments Act and even ask for damages.

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