BUSINESS

RBI directive to NBFCs

CHENNAI JAN. 25. The Reserve Bank of India has directed that non-banking finance companies NBFCs (other than those exempted from the provisions of Sec. 45-1A of the Reserve Bank of India Act 1934) which have not achieved the minimum net owned fund of Rs. 25 lakhs by January 9, 2003, are not entitled to continue the business of a non-banking financial institution beyond that date not withstanding that the application of such company for certificate of registration is pending with the Reserve Bank of India and the decision of the RBI is yet to be communicated to the company.

NBFCs not having minimum net owned fund as on January 9, 1997, were allowed to fulfil the requirement of net owned fund and carry on the business of a non-banking financial institution up to a period of three years (which period has expired on January, 2000) or till such extended period as might be granted to a NBFC by the RBI. In terms of the proviso to Sec. 45-1A (3), the RBI could, however, consider extension of time only up to a period not exceeding, in aggregate, six years from the date of commencement of the RBI Act 1997 and such period has also expired on January 9, 2003.

Hence, the companies which have not fulfilled the requirement of net owned fund as on January 9, 2003 are not entitled to carry on the business of a non banking financial institution.