Cracking the whip on the largest para banking company in the country, the Reserve Bank of India (RBI) has prohibited Subroto Roy-owned Sahara India Financial Corporation Ltd (SIFCL) from accepting public deposits with immediate effect. The Lucknow-based company has public deposits of around Rs 18,000 crore.The RBI issued SIFCL, the largest residuary non-banking company (RNBC), a show-cause notice after the inspection of its books. In response to the show-cause notice, the company sought a personal hearing, which was granted. The company also requested for extension of time to give its written submissions, which was granted. “The submissions received were carefully examined. The Reserve Bank of India has come to the conclusion that the SIFCL had continuously violated directions/guidelines,” the RBI said.The RBI said Sahara violated norms governing maintenance of directed investments and payment of minimum rate of interest prescribed under RNBC (RB) Directions, 1987. It also violated KYC (know your client) norms stipulated for opening of deposit accounts, the RBI said.In a statement, Sahara said it had approached the RBI to set a time-frame governing the changes in the RNBC guidelines but the request was ignored. The RBI acted in a vindictive manner, without considering the depositors’ interests, it said. The company assured its customers that their deposits were safe and said it would take legal recourse against the ban. The company’s other businesses such as life insurance, mutual funds, real estate, entertainment, etc, would carry on as before and would not be impacted by the development, it added. According to the RBI, there were lapses in intimating depositors in time of maturity of their deposits and repayment of deposits on maturity in terms of directions in RNBC rules. The RBI said SIFCL should repay the deposits as and when they mature. “SIFCL should not treat non-payment of instalments under any running daily deposit or other recurring deposit schemes by depositors after the date of this order, as a default by depositor and SIFCL should be liable to pay the agreed rate of interest on the amounts actually held by it for the entire term of the deposit as if there was no default,” the RBI said. The RBI said SIFCL should lodge all securities held in its custody with the designated bank for custody. “SIFCL should strictly comply with the requirements of all the applicable provisions of the RBI Act, the directions, guidelines, instructions and circulars issued by RBI there-under from time to time until such time as all the deposits are repaid with interest in full,” it said.WIELDING THE STICK•Sahara violated RBI guidelines on directed investments, interest rates, etc•RBI action follows inspection and show-cause notice•Sahara should repay deposits as and when they mature
