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April 30, 2002 | 1120 IST
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NBFCs to face penalty for not filing returns

BS Banking Bureau

Non-banking finance companies will face penalties if they do not submit their periodic control returns to RBI.

The central bank said it would impose penalties as provided for in the RBI Act, 1934, as also launch court proceedings, besides considering rejection or cancellation of the certificate of registration of NBFCs having public deposits of Rs 500 million and above, in case of default in the submission of returns.

The central bank said NBFCs are required to submit periodic control returns to RBI.

"However, as laxity has been observed in this regard, in order to inculcate a sense of discipline in this sector, it has been decided to take action against NBFCs for non-submission of returns," it says.

RBI has also voiced concern over NBFCs exposure to the call and demand loans. It said certain NBFCs were granting demand/call loans with an open period or without any stipulation on interest and servicing.

Difficulty was experienced in ensuring compliance with prudential norms on income recognition, asset classification and provisioning in respect of such loans, it said.

In order to obviate these difficulties, it has already directed all NBFCs granting/ intending to grant demand/call loans should lay down a policy duly approved by their boards.

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