RBI advisory on investment with NBFCs...

Economic Times, May 31, 2013

RBI advisory cautions public on depositing money with entities

By PTI | 31 May, 2013, 10.40PM IST

ET SPECIAL:

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 entitiesincluding 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. 

"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. 

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.

Readers' opinions (1)

M G WARRIER (Thiruvananthapuram)

2 Hours ago

Issue of this advisory may give the central bank the satisfaction that as a regulator the bank has done its duty of cautioning public against trusting institutions which are not under the regulatory control of RBI. But such advisories do not help the small savers who go by the advice they get through word of mouth and media about the advantages of making deposits with chit funds and financial companies which offer spurious financial â??productsâ??. GOI, RBI, state governments and banks need to do much more to create awareness among the public about the cheats in the financial sector, perhaps in a much more intensified way than the recent RBI initiative to promote financial inclusion or the banksâ?? efforts to implement KYC norms. Majority of the small savers and retail investors may not have access to RBI Website. Here, both print and electronic media can play a proactive role by using part of the space and time they usually allocate for publicizing scams or irregularities after they happen, for promoting legally permitted financial products.