Reserve Bank of India cancelled certificate of registration of 17 non-banking financial companies; Know More

NEW DELHI- The Reserve Bank of India (RBI) recently cancelled the certificate of registration of 17 non-banking financial companies (NBFCs). The move was made as a part of RBI's ongoing efforts to maintain the stability and soundness of the financial system.

NBFCs are financial institutions that provide banking services without meeting the legal definition of a bank. They play an important role in providing credit to individuals and small and medium enterprises (SMEs), particularly in rural areas where traditional banks may not have a strong presence.

According to RBI's statement, the certificate of registration of these 17 NBFCs was cancelled under Section 45-IA (6) of the Reserve Bank of India Act, 1934, for non-compliance with various regulatory requirements. 

The regulatory requirements include maintaining minimum capital adequacy ratio, complying with know-your-customer norms, and maintaining proper documentation for loans and advances. Non-compliance with these requirements could result in potential risks to the financial system, including credit risk and liquidity risk.

The cancellation of the certificate of registration means that these 17 NBFCs can no longer operate as an NBFC and cannot undertake any lending activities. The RBI has also directed them to exit the business and return the money of their depositors.

This move by RBI serves as a reminder to all NBFCs that they must comply with the regulatory requirements and maintain the necessary standards to ensure the stability of the financial system. Non-compliance with these requirements not only puts the financial system at risk but also puts the depositors' money at risk.

In recent years, the RBI has been taking several measures to strengthen the regulatory framework for NBFCs. It has tightened the norms for lending by NBFCs, introduced prudential norms for liquidity risk management, and increased the minimum capital requirements for NBFCs.

Overall, the cancellation of the certificate of registration of these 17 NBFCs is a stern warning to all financial institutions that non-compliance with regulatory requirements will not be tolerated. It also underscores the importance of maintaining the soundness and stability of the financial system to protect the interests of depositors and the economy as a whole.