RESERVE BANK OF INDIA Department of Non-Banking Supervision, Central Office, Centre 1, Cuffe Parade, Colaba, Mumbai, 400005

Fax: 022 2150540 Telephone 2188122 Telex 011 86135 RBI IN PARYAVEKSHAN¿

Ref.DNBS(PD).No.CC. 9 / 02.01 / 98-99.

March 31, 1999.

To,

All the Non-Banking Financial Companies (NBFCs)
including Residuary Non-Banking Companies (RNBCs)

Submission of Statutory Return on Liquid Assets

Please refer to our circular DNBS(PD)No.CC.8/02.01/98-99 dated January 21, 1999 in terms of which all the NBFCs irrespective of the size of their net owned fund and whether they accepted public deposits or not were advised to submit the return in the Form of Quarterly Return I (to be submitted by RNBCs) or Form of Quarterly Return II (to be submitted by equipment leasing or hire purchase finance or loan and investment company) and Format of Special Return.

2. While majority of the NBFCs have submitted the above returns, it is observed that many of the NBFCs not having public deposits have chosen to avoid filing of the return despite the Directions from the RBI to file ‘Nil’ return in such cases. Some of the companies have requested the Bank to allow them to withdraw their application for Certificate of Registration at this stage while many others have failed in submitting the statutory return. The emerging scenario of compliance with the statutory and regulatory framework by the NBFCs does not inspire confidence that all the companies are amenable to the requirements of Reserve Bank for exercising supervision over them. The Reserve Bank has taken a serious view of the matter. It has, therefore, been decided to issue show cause notices to all such NBFCs which have not submitted these returns and for other reasons of non-compliance of the various provisions of RBI Directions / Act as applicable to them. Further, appropriate supervisory action, as provided for in the RBI Act, will be taken against the companies which have failed to comply with these requirements.

3. As you are aware, Reserve Bank of India has shifted the focus of regulation to the NBFCs accepting / holding public deposits. The deposit taking activities are governed by the provisions of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 in terms of which the ceiling on quantum of public deposits, the requirement of minimum investment grade credit rating and/or higher capital adequacy ratio etc. have been prescribed. The NBFCs having Net Owned Fund (NOF) below Rs.25 lakh are expressly prohibited from accepting any further public deposits or renewing such maturing deposits. The NBFCs are required to maintain liquid assets with correlation to the quantum of public deposits held by them as at the last working day of the second preceding quarter on each day of the current quarter. Although it had earlier been clarified that the companies not holding public deposits need not submit such Return, it is considered necessary by the Reserve Bank of India that, with a view to ascertaining the fact whether any company is holding public deposits or not, each company should submit the Return on liquid assets. It may be clarified that all NBFCs irrespective of the size of their NOF (including those whose applications for Certificate of Registration have been rejected) are required to furnish this Quarterly Return in the prescribed Forms.

4. Accordingly, you are directed to continue to submit the statutory return on liquid assets (copy of Forms enclosed) for every quarter, in future, strictly in accordance with the provisions of Section 45-IB of the RBI Act read with Notification Nos.108, 120 and 121, as applicable to your company. The companies not holding public deposits should invariably submit ‘nil’ information in respect of deposits but they must fill up the information about the net owned fund as per last audited balance sheet against item No.10(i) of the Form of Quarterly Return II. Any default or persistent non-compliance with this requirement will attract penal provisions under the RBI Act including cancellation of the Certificate of Registration, if already granted or rejection of the application for such a registration, if still pending with the RBI.

5. The Return should be submitted to the Regional Office of the Department of Non-Banking Supervision of the RBI having jurisdiction over your company and not to the Central Office.

Yours faithfully,

(Mohindar Kumar)
Assistant General Manager.