Sahara India Financial Corporation and Peerless General Finance and Investment Company have come under the close scrutiny of the Reserve Bank of India.
RBI has put accounting firm KPMG on the job to check if the two residuary non-banking companies are adhering to the strict investment norms and other regulatory directions.
The two RNBCs together account for almost the entire deposit base of RNBCs and a major part of the deposits of all non-banking finance companies.
Sahara and Peerless have already conveyed to the RBI that they have complied with all regulatory directions, but the central bank doesn't believe in what they say, said a industry source.
RBI wants to ensure Sahara and Peerless have complied with the directives in letter and spirit during 2004-05, he added.
KPMG has been asked to submit its report in 45 days. KPMG's brief is to examine whether the two RNBCs have complied with the norm of investing 90 per cent of their deposits in RBI approved securities, including government securities.
The other issues of concern for RBI adherence to the know your customer guidelines based on the Prevention of Money Laundering Act, 2002, and also the fit and proper criteria for appointment of board members.
In June 2004, RBI had asked RNBCs to reduce discretionary investments to 10 per cent of their deposits by April 2005 and completely dispense with it from April 2006.
RBI wants to improve transparency at the public-deposit taking RNBCs, especially with regard to connected lending relationships and corporate governance standards.
It also wants RNBCs to have appropriate systems at all points of transactions with the depositor including intermediaries.