In a major crackdown on the Non-Banking Financial Companies(NBFCs), the Reserve Bank of India(RBI) has revoked the registration or license of 135 entities across the country. The move is intended towards enhancing regulatory oversight, ensuring financial transparency, thwarting fraudulent practices and strengthening compliance with the regulatory framework. Of these 135 NBFCs, 125 of them were from the state of West Bengal, whose licenses were cancelled for regulatory violations and indulging in financial misadventure.
The companies whose certificate of registration was cancelled includes Express Fincap House, Akshay Fiscal Services, Times Finance (P), Jupiter Projects (P), Jupiter Finvest, Essel Finance Business Loans and Citiwide Financial Services. Separately, 13 other NBFCs voluntarily surrendered their licences or certificate of registration as they were exiting the business or due to amalgamation or merger of the business. J. Thomas Finance, Econ-Super Sales, Hitesha Finance and Investment, Tinnevelly Tuticorin Investments, Carnex Vinimay, and Impact Leasing surrendered their licences due to exit from Non-Banking Financial Institution (NBFI) business, the release by RBI stated.
Apart from 125 NBFCs from West Bengal whose licenses were ceased, four other NBFCs were from Maharashtra, two were from Delhi and one each in Madhya Pradesh, Manipur, Tamil Nadu and Telangana. “Registrations of 135 NBFCs were cancelled under Section 45-IA (6) of the RBI Act, 1934. The cancellations were primarily due to non-compliance with regulatory requirements, failure to meet conditions under which registration had been granted or cessation of NBFC activities. As a result, these companies are no longer permitted to carry on the business of a non-banking financial institution (NBFI)”, the RBI statement added.
However, RBI has not disclosed company-specific reasons for each cancellation. The central bank’s notification merely states that the certificates were cancelled in exercise of powers conferred under Section 45-IA(6) of the RBI Act, 1934. Meanwhile, RBI has repeatedly cautioned and warned the NBFCs to comply with the regulatory frameworks to stay in the business. However, repeated violation of norms and indulging in unfair practices has led to the revocation of licences.
What are NBFCs
NBFCs stand for Non-Banking Financial Companies. They lend financial services such as loans, investment opportunities, asset financing, infrastructure financing etc. However, they are different from traditional banks. Unlike the banks, these NBFCs cannot accept demand deposits such as savings bank account deposit or current account deposit. Thus, NBFCs play a major role in the nation’s credit system. As they lend loans to the public, RBI expects strict adherence to operational and governance criteria and the non-compliance has led to dismissal of the licences.
RBIs move is deemed as a proactive financial measure to regulate and bring transparency and stability across the financial ecosystem of the country and protect stakeholders interests.
