RBI moves apex court on Sahara order stay

The Lucknow bench of the Allahabad High Court had on Thursday stayed the RBI ban, following a plea by SIFCL’s Executive Director O P Srivastava and adjourned the matter for further directions to last week of July.

The RBI had on Wednesday “prohibited (SIFCL) with immediate effect from accepting any deposits in whatsoever manner including installments under any running daily deposit or other deposits,” citing violation of norms.

The regulator, to “protect the interests of depositors and in public interest”, had barred Sahara from raising fresh deposits and renewing the maturity of funds it had already mopped up from 42.5 million depositors.

RBI had said that the violations related to maintenance of directed investments, payment of minimum interest rate, asset-liability management guidelines and know-your-customer (KYC) norms stipulated for opening of deposit accounts and the details on the agents of the company deployed for deposit mobilisation.

While staying the RBI’ directive, the HC was told that there was not a single investor complaint or default by the company since 1997. The counsel for SIFCL said that RBI, in a letter sent on April 16, had wanted the company to discontinue its non-banking finance operations by March 2010 and thereafter sent a show-cause notice on May 9.

Following this, the chairman of the company and Srivastava met RBI officials and conveyed their proposal to continue the business till 2015. However, subsequently through a June 2 communique the Sahara Group conveyed its willingness to operate the para-banking business only till June 2010.

The counsel submitted that the RBI did not take this letter into account before slapping a ban.