Govt seeks details of NBFCs from RBI

PATNA: Disconcerted by reports about siphoning of deposits to the tune of Rs 1,000 crore by non-banking finance companies (NBFCs) in and around Indore in Madhya Pradesh, Nitish government has made a reality check of the situation in Bihar. Accordingly, it has sought details from the RBI about the board of directors of 267 NBFCs operating in Bihar.
In this regard, deputy CM Sushil Kumar Modi said on Thursday that the RBI had so far furnished details about 35 NBFCs."We do have instances of NBFCs siphoning off money deposited by investors with them in Bihar," Modi said, referring to the cases of three such companies, including JVG and Helius Group, whose cases surfaced in the late 1990s following which the then Rabri Devi government set up Nagendra Rai Commission to probe into the functioning and operations of the NBFCs active in Bihar, as well as to hear the complaints of depositors.
According to Modi, the NBFCs, by rule, operate in a particular area after taking licence from the RBI. "The state government has no regulatory role on them. It does not have control on them and their activities," he added.
Nonetheless, the Bihar government, after the submission of its report by the Rai Commission in 2000, took a slew of steps, so that the people who deposit their money in NBFCs are neither swindled nor fleeced off. It first enacted Bihar Protection of Interest of Depositors Act in 2002, and then followed it up by framing its rules two years later. "The state's finance department, thereafter, set up a Financial Institutions Directorate (FID) to invite and hear complaints of depositors whose money have been siphoned off," Modi said.
As many as 13,596 depositors submitted claims pleading for the return of their principal amount amounting to Rs 19.07 crore for hearing and resolution.
"Follow up action was done on the applications received by the FID," Modi said, adding that the government, in the meantime, also decided to set up two courts, one each at Patna and Muzaffarpur, to adjudicate on the cases after lodging of FIRs against the NBFCs by the depositors. "The courts will be set up soon. It will help in expeditious resolution of the cases," he added.
Meanwhile, the FID started scrutinizing the claims lodged with it. Initial study revealed that 18 companies owed money to 1,231 depositors.
So far, FID has received 798 cheques worth Rs 2.10 crore to be made available to the depositors concerned. The companies involved include seven cooperative societies, which owe Rs 1.87 crore to the depositors, and three other major NBFCs - Barl India, Escorts Finance Limited and Llyod Finance - that owed Rs 2.07 crore to 1,183 depositors.