RBI / 2004-05 / 208
DNBS (PD) C.C. No. 44 / 02.01 / 2004-05
October 5, 2004
To,
All Non-Banking Financial Companies (NBFCs), Miscellaneous Non-Banking Companies
(MNBCs) and Residuary Non-Banking Companies (RNBCs)
Dear Sirs,
Premature repayment of public deposits or deposits
The provisions relating to premature repayment (after the minimum
lock-in period) of public deposits or deposits, are contained in -
(i) Non-Banking Financial Companies Acceptance of Public
Deposits (Reserve Bank) Directions, 1998 in the case of NBFCs;
(ii) Miscellaneous Non-Banking Companies (Reserve Bank)
Directions, 1977 in the case of MNBCs; and
(iii) Residuary Non-Banking Companies (Reserve Bank) Directions,
1987 in the case of RNBCs.
As stipulated therein, in terms of (i) and (ii) above, a NBFC
or MNBC is not permitted to repay any public deposit or deposits as the case
may be, within a period of three months from the date of acceptance of the same.
Similarly, under (iii) above, a RNBC is not permitted to repay any deposit within
a period of twelve months from the date of its acceptance. However, after the
above lock-in period, the public deposits or deposits can be pre-paid subject
to certain conditions.
2. It has been brought to the notice of the Bank that certain
companies have offered to the depositors the right to premature repayment. Such
repayments may vitiate the ALM discipline of companies and in case of a company
whose assets may be insufficient to meet all its outside liabilities, such repayments
may result in preferential treatment to those depositors who exit early. As
such, the said provisions need a review, for the purpose of safeguarding the
ALM discipline among the companies and to restrict preferential prepayment.
Further, the provisions relating to repayment of deposits and the applicable
interest rate in the event of unforeseen death of a depositor, also need a review.
3. Prepayment of deposits – Eligibility
(1) The above issues have been reviewed in consultation
with Informal Advisory Group on NBFCs. It has been decided to stratify the NBFCs,
MNBCs and RNBCs for the purpose of permission to prepay the deposits into two
categories viz.
(i) Problem NBFCs, MNBCs and RNBCs (hereinafter
called 'problem company/ies' as defined now in the respective RBI
Directions)
(ii) Normally run companies (the expression
would mean the NBFCs, MNBCs and RNBCs other than problem companies)
Minimum lock – in period
(2) It has been decided to retain the minimum lock-in period
within which a NBFC, RNBC or MNBC shall not repay a public deposit (in case
of NBFC) or deposit (in case of RNBC and MNBC) or grant any loan against such
deposits.
Restrictions on prepayment in the case of problem companies
(3) The problem companies are prohibited from making premature
repayment of any deposits (public deposits in case of NBFCs) or granting any
loan against public deposits / deposits, as the case may be. However, the existing
contracts conferring the right for premature withdrawal on the depositor would
remain unchanged, but where the depositor, in case of a problem company does
not have such a right or where the problem company has reserved the right to
agree to the depositor’s request for prepayment, such company shall not effect
any premature repayment. The prohibition shall not, however, apply in the following
cases:
(i) Death of the depositor
In the event of death of the depositor, the public
deposit or deposit may be repaid prematurely, even within the lock – in period,
to the surviving depositor/s in the case of joint holding with survivor clause,
or to the nominee or the legal heir/s of the deceased depositor. The facility
shall be allowed by the problem company on the request of the joint holders
with survivor clause/nominee/ legal heir only against submission of relevant
proof, to the satisfaction of the company.
(ii) Special facility for tiny and other
deposits
The problem company may, after the minimum lock
– in period, pay, in entirety, at the request of the depositor the principal
sum of deposits or grant loan against the tiny deposits up to Rs.10000/- (hereinafter
called 'tiny deposits'). In order to avoid any discrimination in
allowing premature payment of other deposits, the deposits above Rs.10000/-
may also be prepaid (or loan to that extent granted thereagainst) at the request
of the sole/first named depositor for meeting expenses of an emergent nature,
subject to the satisfaction of the problem company concerned about the circumstances
but the amount of prepayment should not exceed Rs.10,000/- in any case. In
the case of deposits above Rs.10,000/-, the remaining amount and interest
on the deposit shall be payable only after maturity.
Prepayment in case of normally run companies
(4) The facility of premature repayment, after the lock-in
period, of public deposits by normally run NBFCs (deposits in case of RNBCs
/ MNBCs) would, henceforth, be at the sole discretion of the company and cannot
be claimed as a matter of right by the depositors. The existing contracts conferring
the right for premature withdrawal on the depositor, would, however, remain
unchanged. Further in the event of death of a depositor, the company may, even
within the lock - in period, repay the deposit at the request of the joint holders
with survivor clause / nominee / legal heir only against submission of relevant
proof, to the satisfaction of the company.
Clubbing of deposit accounts in the same capacity
(5) All deposit accounts standing to the credit of sole/first
named depositor in the same capacity shall be clubbed and treated as one deposit
account for the purpose of premature repayment.
3. Rate of interest if the company agrees to the request
for premature withdrawal
Where a company, at the request of the depositor or at its
sole discretion, as the case may be, repays, subject to the aforesaid conditions,
a deposit/public deposit before its maturity (including in the case of death
of the depositor), it shall pay interest at the following rates:
NBFCs
|
Up to 3 months (Lock - in period) |
No repayment (Not applicable in case of repayment in the event of death of the depositor) |
|
After 3 months but before 6 months |
No interest |
|
After 6 months but before the date of maturity |
The interest payable shall be 2 per cent lower than the interest rate applicable to a public deposit for the period for which the public deposit has run or if no rate has been specified for that period, then 3 per cent lower than the minimum rate at which public deposits are accepted by the NBFC. |
RNBCs
|
Up to 12 months from the date of deposit (Lock-in-period) |
No repayment (Not applicable in case of repayment in the event of death of the depositor) |
|
After the expiry of 12 months but before the date of maturity |
The interest payable shall be 2 per cent lower than the interest rate applicable to a deposit for the period for which the deposit has run or if no rate has been specified for that period, then 3 per cent lower than the minimum rate at which deposits are accepted by the RNBC. |
MNBCs
|
Up to 3 months from the date of deposit (Lock-in-period) |
No repayment (Not applicable in case of repayment in the event of death of the depositor) |
|
After 3 months but before 6 months |
No interest |
|
After 6 months but before the date of maturity |
The interest payable shall be 2 per cent lower than the interest rate applicable to a deposit for the period for which the deposit has run or if no rate has been specified for that period, then 3 per cent lower than the minimum rate at which deposits are accepted by the MNBC. |
4. Issue of notice of maturity to depositors
The companies shall intimate their depositors at least 2 months
before maturity of their respective deposits/ public deposits, the details of
such maturity, so as to ensure that matured deposits do not remain with the
company due to such deposits not claimed by the depositor.
5. The amended provisions shall apply to the public deposits
accepted or renewed by the NBFCs (including problem NBFCs) from the date of
Notification by Reserve Bank. These shall also apply to the existing deposit
contracts whereunder the depositor does not have a right to premature withdrawal
of the deposit.
6. The amending Notifications Nos. 179, 180, 181 of date as also
the Notifications Nos.
a. DFC. 118 /DG (SPT) – 98 dated January 31,
1998;
b. DFC. 55 / DG (O) – 87 dated May 15, 1987;
and
c. DNBC. 39 / DG (H) – 77 dated June 20, 1977
(as amended up-to-date) are enclosed for your information and
meticulous compliance.
7. Please acknowledge receipt to the Regional Office of
the Department of Non-Banking Supervision, Reserve Bank of India under whose
jurisdiction the Registered Office of your company is situated.
Yours faithfully,
Sd/-
( O. P. Aggarwal )
Chief General Manager-in-Charge
|