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 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.
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 and should lodge all securities held in its custody with the designated bank for custody.