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RBI advises public to check before investing with financial entities

Updated: Jun 01, 2013 04:25:52pm
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New Delhi, Jun 1 (KNN) The Reserve Bank of India (RBI) has today issued an advisory to members of public urging them to carefully evaluate their investment decisions, including making deposit with non-bank financial companies (NBFCs).
 
The move comes in the wake of the recent chit fund scam reported in West Bengal that left scores bereft of their savings.
 
According to an official notification, the advisory is part of the frequently asked questions issued by the central bank.  While explaining in detail the various kinds of financial entities and the regulations governing them, the FAQs also list where the general public can register complaints in the event of discrepancies.
 
RBI that regulates NBFCs that conduct financial activity as their principal business has authorised only a few NBFCs (as listed on the RBI website) to accept deposits.  Further, it does not regulate chit fund activities or collective investment schemes.
 
The RBI advisory has also warned the public about fictitious offers promising unsustainable returns by individuals, unincorporated bodies and companies; urging individuals to register complaints of inconsistencies with the local police or with the Economic Offences Wing of the State Police and in case the entity is a company, to register their complaints with the Registrar of Companies.
 
Should a depositor wish to make an investment with an NBFC, he should ensure that the financial body is authorised to accept deposits.  Further, the NBFC should display the certificate of registration issued by the RBI. 
 
Significantly, RBI does not guarantee the repayment of deposits accepted by NBFCs.  Besides, NBFCs cannot use the name of the RBI in any manner while conducting their business.

Currently, the maximum interest rate that an NBFC can pay to a depositor should not exceed 12.5 per cent. The Reserve Bank, however, keeps changing these interest rates depending on the macro-economic environment and therefore publishes the change in the interest rates on www.rbi.org.in → Sitemap → NBFC List → FAQs.

Needless to say, the depositor must insist on a proper receipt for every amount of deposit placed with the company.  It is often the case that when interest rates on investments are higher than those offered by others in the market place, there is cause for worry.  (KNN)

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