As of September 2017, there were 11,469 non-banking financial companies (NBFCs) registered with the Reserve Bank of India. Over 82% of them have been categorised as high-risk financial institutions by the Finance Ministry. Under the Prevention of Money Laundering Act (PMLA), all NBFCs have to appoint a principal officer in the financial institutions and report all suspicious and cash transactions of over Rs 10 lakh to the Financial Intelligence Unit (FIU). But, these companies have been found flouting these rules as on January 31, 2018.
The list of around 9,500 NBFCs released by the FIU today includes names like Purshottam Investofin and Shalibhadra Finance Limited, which were Dalal Street darlings last year with their share prices surging 322% (till Jan 16 this year) and 120% in the past year. Other names on the list include Moody's Investment Company India Private Limited, Adani Capital Private Limited, Upasana Finance, Dlf Finvest Limited, Bombay Gas Co Ltd, Srestha Finvest Ltd, The Kamdhenu Finance Company Private Limited, Tribhuvan Finlease & Developers Pvt Ltd among several others. The full list can be found here: http://fiuindia.gov.in/pdfs/quicklinks/High%20Risk%20NBFCs%20as%20on%2031.01.2018.pdf
This is not the first time that NBFCs are having a run-in with the authorities. Post-demonetisation, these companies along with several rural and urban cooperative banks had come under the scanner of the Income Tax Department and the Enforcement Directorate (ED) for illegally converting banned currency notes.
Given that NBFCs are set to increase their share in the overall credit pie in the next few years, stringent oversight becomes all the more necessary. According to a Crisil report released last November, the share of non-banking financiers in the loan market is expected to go up to 19 per cent by fiscal 2020 - up from 16 per cent in 2016-17 - on the back of an 18 per cent annual growth in their loan books.
It's worth mentioning here that just last week the RBI launched the Ombudsman Scheme for NBFCs aimed at grievance redressal. "The scheme will provide a cost-free and expeditious complaint redressal mechanism relating to deficiency in the services by NBFCs covered under the Scheme," said the apex bank. The offices of the NBFC ombudsmen will function at Delhi, Chennai, Kolkata and Mumbai. "To begin with, the Scheme will cover all deposit-taking NBFCs. Based on the experience gained, the RBI would extend the scheme to cover NBFCs having asset size of Rs 100 crore and above with customer interface," added the RBI.
Here's how it works: The complainant must first approach the concerned NBFC and if the latter "does not reply within a period of one month after receipt of the complaint", or it rejects the complaint or if the complainant is not satisfied with the reply given by the NBFC, he/she can "file the complaint with the NBFC Ombudsman under whose jurisdiction the branch/ registered office of the NBFC falls". According the FAQ released by the RBI, the NBFC Ombudsman will not charge any fee for filing and resolving customer complaints.
With PTI inputs