Recorded RBI impact
Directive prohibition
Directive prohibition · Fresh imposition
Published by RBI
4 Jun 2008
Case Brief
The Reserve Bank of India issued an order under Sections 45K and 45MB(1) of the RBI Act, 1934, prohibiting Sahara India Financial Corporation Ltd. (SIFCL), a residuary non-banking company based in Lucknow, from accepting public deposits with immediate effect. RBI said the company had continuously violated multiple directions and guidelines, including those on maintenance of directed investments, minimum interest payment, ALM norms, KYC requirements for deposit accounts and agent disclosures, and timely communication to depositors and repayment on maturity. RBI directed SIFCL to repay deposits as they mature, maintain the required directed investments, lodge securities with the designated bank, notify agents and employees, and continue complying with applicable RBI requirements until all deposits are repaid with interest in full.
Why RBI Acted
RBI said SIFCL had continuously violated directions/guidelines, including para 6(1) of the RNBC (RB) Directions, 1987 on maintenance of directed investments, para 5 on payment of minimum interest, ALM guidelines in Circular 15 dated June 27, 2001, KYC norms for opening deposit accounts and disclosure of agents, and para 5A on informing depositors at maturity and repaying deposits on time. On being satisfied that the action was necessary to protect depositors' interests and in public interest, RBI prohibited the company under Sections 45K and 45MB(1) of the RBI Act, 1934 from accepting any deposits in any form, including fresh deposits, renewals, instalments under running daily/recurring schemes, from existing or new depositors.
Operating Impact
SIFCL must stop taking any new or renewal deposits immediately, including instalments under recurring or daily deposit schemes. It must continue repaying deposits as they mature, maintain specified investments and securities, inform agents and employees, and comply with RBI requirements until all deposit liabilities are fully discharged; existing depositors are directly affected by the repayment and interest obligations.
Regulatory Basis
- Section 45K of the Reserve Bank of India Act, 1934
- Section 45MB(1) of the Reserve Bank of India Act, 1934
- Sections 45K and 45 MB(1) of RBI Act, 1934
Action Facts
- Primary Impact
- Directive prohibition
- Effective From
- 14 Aug 2007
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- NBFC