The Reserve Bank of India, having considered it necessary in the public interest, and being satisfied that, for the purpose of enabling the Bank to regulate the credit system to the advantage of the country, it is necessary to amend the Non-Banking Financial Companies Acceptance of Public Deposit (Reserve Bank) Directions, 1998, in exercise of the powers conferred by sections 45J, 45K, 45L and 45MA of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the powers enabling it in this behalf, hereby directs that the said directions contained in Notification No.DFC.118/DG(SPT)/98 dated January 31,1998 stand amended with immediate effect, as follows, namely -

1.

In paragraph 2, in sub-paragraph (2) after the words and figure and brackets "(Act No.1 of 1956)", the following shall be inserted namely, -

"or Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 or the Residuary Non-Banking Companies (Reserve Bank) Directions, 1987"

2.

In paragraph 4, sub-paragraph (4) shall be substituted by the following, namely, -

No equipment leasing company or hire purchase finance company or loan company or investment company shall, accept or renew public deposit except as provided hereunder -

EL/HPFC

(a)

An equipment leasing company or a hire purchase finance company -

(i)

having NOF of twenty five lakh of rupees or more; and

(ii)

Complying with all the prudential norms with capital adequacy ratio of not less than fifteen percent as per last audited balance-sheet,

may, accept or renew public deposit, together with the amounts remaining outstanding in the books of the company as on the date of acceptance or renewal of such deposit, not exceeding one and one half times of its NOF or public deposit upto ten crore of rupees, which ever is lower.

(b)

An equipment leasing company or a hire purchase finance company, -

(i)

having NOF of twenty five lakh of rupees or more;

(ii)

complying with all the prudential norms; and

(iii)

having minimum investment grade credit rating,

may, accept or renew public deposit, together with the amounts remaining outstanding in the books of the company as on the date of acceptance or renewal of such deposit, not exceeding four times of its NOF.

LC/IC

(c)

A loan company or an investment company, –

(i)

having NOF of twenty five lakh of rupees or more;

(ii)

having minimum investment grade credit rating; and

(iii)

complying with all the prudential norms with capital adequacy ratio of not less than fifteen percent as per last audited balance-sheet,

may, accept or renew public deposit, together with the amounts remaining outstanding in the books of the company as on the date of acceptance or renewal of such deposit, not exceeding one and one half times of its NOF:

Provided that a loan company or an investment company which is complying with all the above conditions and having, as on the date of its coming into force of these directions, AAA (triple A) grade credit rating but not having capital adequacy ratio of fifteen percent may, so long it continues to maintain the same position of its credit rating, accept or renew public deposit only upto the extent of not exceeding the amount outstanding as at the close of business on December 18, 1998 or one and one-half time of its NOF, whichever is more, and shall bring down its public deposit to the level as specified in paragraph 4(6) of the directions and also attain the capital adequacy ratio of fifteen percent before March 31, 2000.

(d)

A loan company or an investment company which complies with all the prudential norms and having, as on the date of coming into force of these directions –

(i)

NOF of twenty five lakh of rupees or more; and

(ii)

AA (double A) grade credit rating; but not having capital adequacy ratio of fifteen percent or above as per last audited balance-sheet

may, so long it continues to maintain the same position of its credit rating, accept or renew the public deposit together with the amounts outstanding in the books of the company on the date of acceptance or renewal of such deposit, not exceeding an amount equivalent to its NOF until it attains the capital adequacy ratio of fifteen percent but not later than March 31, 2000 (as per audited balance-sheet) with other stipulations remaining the same.

(e)

A loan company or an investment company which complies with all the prudential norms and having, as on the date of coming into force of these directions –

(i)

NOF of twenty five lakh of rupees or more; and

(ii)

A (single A) grade credit rating but not having capital adequacy ratio of fifteen percent or above as per last audited balance-sheet

may, so long it continues to maintain the same position of its credit rating, accept or renew the public deposit, together with the amounts outstanding in the books of the company as on the date of acceptance or renewal of such deposit not exceeding an amount equivalent to one-half of its NOF until it attains the capital adequacy ratio of fifteen percent but not later than March 31, 2000 (as per audited balance-sheet) with other stipulations remaining the same."

3.

In paragraph 4, sub-paragraph (5) shall be substituted by the following namely, -

"Downgrading of Credit Rating

(5)

In the event of downgrading of credit rating below the minimum specified investment grade as provided for in paragraph 4(4), a non-banking financial company shall regularise the excess deposit as provided hereunder :

ELC/HPFC

(i)

An equipment leasing company or a hire purchase finance company shall,

(a)

with immediate effect, stop accepting public deposit, if it is already holding public deposit to the extent permissible under sub-clause (b) of paragraph 4(4) above;

(b)

report the position within fifteen working days to the Reserve Bank of India; and

(c)

reduce, within three years from the date of such downgrading of credit rating, the amount of excess public deposit to nil or the appropriate extent permissible under sub-clause (a) of paragraph 4(4) above as the case may be, to which it is entitled to accept, by repayment as and when such deposit falls due or otherwise.

LC/IC

(ii)

A loan company or an investment company shall,

(a)

with immediate effect, stop accepting public deposit;

(b)

report the position within fifteen working days to the Reserve Bank of India; and

(c)

reduce, within three years from the date of such downgrading of credit rating, the amount of excess public deposit to nil by repayment as and when such deposit falls due or otherwise."

4.

In Paragraph 4, sub-paragraph (6), shall be substituted by the following, namely, -

(6)

"Where an equipment leasing company or a hire purchase finance company or a loan company or an investment company holds, at the close of business on December 18, 1998 public deposit in excess of the appropriate extent to which it is entitled to accept under the above provisions of these directions, it shall,

(i)

stop accepting public deposit; and

(ii)

reduce, before December 31, 2001, the amount of excess public deposit to nil or the appropriate extent permissible under sub-clause (d) or (e) of paragraph 4(4) above as the case may be, by repayment as and when such deposit falls due or otherwise.

Note :

In the event of excess public deposits arising out of the regulatory ceiling or downgrading of credit rating, the NBFC may renew the maturing public deposit subject to the compliance of the repayment stipulations contained in sub-paragraph (5) and (6) of paragraph 4 and other provisions of these directions. It is to clarify that no matured public deposit shall be renewed without the express and voluntary consent of the depositor."

5.

In Paragraph 4, in sub-paragraph (12), the sub-clause (a) of clause (ii) shall be substituted by the following, namely, -

(a)

"the credit rating assigned for its fixed deposit and the name of the credit rating agency which rated the company or a statement from the management if it is an equipment leasing or a hire purchase finance company that, the quantum of public deposit held by it is not exceeding one and one-half times of its NOF or not exceeding rupees ten crore whichever is less."

6.

In Paragraph 4, in sub-paragraph (13), in clause (i), the following sub-clause shall be inserted, namely, -

(h)

"the information, relating to the aggregate dues (including the non-fund based facilities provided to) from companies in the same group or other entities or business ventures in which, the directors and/or the NBFC are holding substantial interest and the total amount of exposure to such entities."

7.

In Paragraph 4, in sub-paragraph (16), the clause (ii) shall be substituted, by the following, namely, -

(ii)

"The register or registers aforesaid shall be kept at each branch in respect of the deposit accounts opened by that branch of the company and a consolidated register for all the branches taken together at the registered office of the company and shall be preserved in good order for a period of not less than eight calendar years following the financial year in which the latest entry is made of the repayment or renewal of any deposit of which particulars are contained in the register;

Provided that, if the company keeps the books of account referred to in sub-section (1) of section 209 of the Companies Act, 1956 (1 of 1956) at any place other than its registered office in accordance with the proviso to that sub-section, it shall be deemed to be sufficient compliance with this clause if the register aforesaid is kept at such other place, subject to the condition that the company delivers to the Reserve Bank of India a copy of the notice filed with the Registrar of Companies under the proviso to the said sub-section within seven days of such filing."

8.

In Paragraph 6, in sub-paragraph (1), before the proviso, the following shall be inserted, namely, -

"or

a non-banking financial company may entrust such securities to the Stock Holding Corporation of India Ltd., with the prior approval, in writing, of regional office of the Reserve Bank of India under whose jurisdiction the registered office of the company is situated as specified in second schedule hereto, subject to such conditions as may be specified by the Reserve Bank of India in this behalf."