RBI warns against fraudulent financial firms

Mumbai: Amid rising incidents of fraudulent investment schemes hitting investors, the Reserve Bank today asked the public to carefully evaluate their decisions before depositing money with financial entities including NBFCs.

The exhaustive advisory of dos and don’ts comes against the backdrop of investment schemes such as the multi-crore Saradha scam, which defrauded thousands of gullible investors in West Bengal.[caption id=“attachment_832901” align=“alignleft” width=“380”] The Reserve Bank of India logo. Reuters [/caption]

“The advisory is part of the Frequently Asked Questions (FAQs) issued by the central bank. The FAQs explain in details the various kinds of financial entities and the regulations governing them,” RBI said in a statement.

The advisory also listed as to where people can lodge complaints in case some financial entity is found to be conducting business unauthorisedly or does not repay the deposits.

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The statement said that an investor wanting to place deposit with an NBFC must ensure that it is registered with RBI and is authorised to accept deposits.

This can be checked from the list of deposit taking NBFCs published on the RBI website - www.rbi.org.in, it said.

The depositor should check the list of NBFCs permitted to accept public deposits and also check that it is not appearing in the list of companies prohibited from accepting deposits, it added.

NBFCs have to prominently display the Certificate of Registration (CoR) issued by the Reserve Bank on its site. If an NBFC is authorised to accept public deposit, the certificate reflects that, it said.

RBI also advised that investors must generally be circumspect if the interest rates or rates of return on investments offered are higher than those offered by others in the market place.

Currently, the maximum interest rate that an NBFC can pay to a depositor should not exceed 12.5 percent.

However, the RBI keeps changing these interest rates depending on the macro-economic environment. The central bank publishes the change in the interest rates on its website.

The depositor must insist on a proper receipt for every amount of deposit placed with the company, the statement said, adding that it should be duly signed by an officer authorised by the company and should state the date of the deposit, the name of the depositor, the amount in words and figures, rate of interest payable, maturity date and amount.

RBI authorised only a few Non-bank Financial Companies to accept deposits and all incorporated entities must necessarily be authorised to collect deposits either under the Reserve Bank of India Act 1934 or under the Companies Act, 1956.

The central bank clarified that it does not regulate chit fund activities or Collective Investment Schemes (CIS).

The advisory noted that the RBI has been, on several occasions in the past, through press releases and through its outreach and sensitisation programmes conducted by its Regional Offices, cautioning the general public not to fall prey to fictitious offers promising unsustainable returns by

individuals, unincorporated bodies and companies.

The RBI FAQs also advise members of public to immediately register their complaints in case they notice any company accepting deposits unauthorisedly or not repaying the principal or interest with the local police or with the Economic Offences Wing of the State Police, it said.

In case the entity is a company, to register their complaints with the Registrar of Companies, it added.

At its first meeting last week an inter-ministerial group (IMG), headed by the Department of Financial Services Additional Secretary, had discussed gaps in the regulatory mechanism to deal with collective investment schemes at its first meeting here.

PTI