HC stay puts finance Co.s back in business

“Anyway since the cash crunch of 1995 our deposits have been limited to friends, relatives and associates, with the public’s contribution being at its lowest,” said an operator.

The controversial Section 45 (S) of the Reserve Bank of India (Amendment) Act had sought to ban such unincorporated bodies from mobilising deposits from April 1, 1997. For the first time hire purchase firms were also bracketed under this category with the ban extending to them too.

However, a spate of petitions filed against the RBI and the government have put a spanner in RBI’s plans. In Tamil Nadu alone, over seven writs have been allowed by the courts and the Madras High Court has granted a permanent stay against Section 45 (S).

A permanent stay, as against an interim one, is applicable until the dismissal of the writ and finance circles are confident that a minimum of two years would be needed for this to take place. “Until then we can accept deposits,” a senior official of the South India Hire Purchase Association said.