MUMBAI, DEC 3: The non-banking financial services sector is facing a major shakeout with a whopping number of 26,671 non-banking finance companies (NBFCs) failing to bring in fresh funds to enhance their net owned funds. With the deadline set by the Reserve Bank of India (RBI) barely one month away, many of these NBFCs - most of them are unlikely to meet the RBI norms as they are already defunct - are set to down their shutters.The RBI has asked NBFCs, having net owned funds (NOF) below the prescribed limit of Rs 25 lakh, to enhance their NOF to the minimum level by January 9, 2000. The application for registration from 26,671 NBFCs, having NOF below Rs 25 lakh, have been kept pending to enable them to meet the required criterion as required by the RBI Act, the central bank said in a statement here today.The RBI move to tighten the guidelines follows the disappearance of many shady NBFCs after collecting public deposits. Hundreds of NBFCs siphoned of funds and refused to pay back investors, therebybringing a major crisis of confidence in the financial services sector. The collapse of NBFCs like JVG Finance, Helios, Prudential, CRB Capital, DSJ Finance and Kuber Finance destroyed the investor confidence in NBFCs.These NBFCs had already defaulted hundreds of crores of rupees to investors. ``Investors have suffered huge losses in NBFCs. The recovery process is also painfully slow. The government has not done much to recover our funds,'' said an investor.Earlier, the RBI had granted such NBFCs, with NOF below the prescribed limit, time upto three years to attain the prescribed minimum NOF which expires on January 9, 2000. The RBI may not grant further extension to those NBFCs failing to meet the criterion by the prescribed date, it said. Applications of 1,561 NBFCs are also pending for registration with the RBI on account of their failure to comply with various other supervisory requirements of the act.If over 26,000 NBFCs close down, there will be major chaos in the financial market. ``Thelackadaisical approach of NBFC promoters in meeting RBI guidelines is deplorable and suicidal. The RBI should not extend the deadline to meet the NOF requirement. They already got three years. Even if they get another three years, most of them would not meet the RBI requirement,'' investors said.Many NBFCs - whose applications are pending with the RBI - are practically enjoying the status of NBFCs and also collecting deposits from the public without any restrictions. On the other hand, NBFCs are saddled with huge non-performing assets (NPAs) and starved of funds.Investor Grievances Forum (IGF) had recently criticised the lethargy and chaos in the RBI and finance ministry about regulating the NBFCs. ``Lakhs of small investors and depositors have suffered as hundreds of NBFCs are not repaying interest and deposits,'' it said.Investors also expressed surprise over the decision of the RBI and the finance ministry to come out with a proposal for a separate arrangement - on the lines of the SEBI - tocontrol these NBFCs. However, neither the RBI nor the finance ministry is prepared to take the responsibility to see that investors get back their funds.Kuber complaintsMUMBAI: Investor complaints against plantation companies are multiplying. Market regulator SEBI has received 3,743 complaints against Kuber Planters Ltd. However, the company has not redressed a single complaint from the investors. These complaints mostly pertain to non-repayment of principal and interest.
