138 non banking company giving loan
Sukhija
(Querist) 26 February 2010
This query is : Resolved
Hi
Can a non banking company legally give loan to any person without having any license for the same.
loan with interest is given by the company to my client. company officer says that it is not applicable for his company to have license from any body. is it right?
Arvind Singh Chauhan
(Expert) 26 February 2010
No.For any banking company, it is necessary to have valid license from RBI.
A V Vishal
(Expert) 26 February 2010
The Reserve Bank has issued notifications from time to time exempting some entities from the requirements of Chapter III B of the RBI Act, 1934 or part thereof. A Master Circular on the basis of notifications issued upto June 30, 2005 has been prepared.
While the Master circular has been prepared to enable the users to have the benefit of a consolidated circular, for the purpose of operations, they should refer to the instructions/directions contained in the relevant notification. The Master Circular is based on notifications listed in the Annexure.
2 (i) Exemption from provisions of Chapter III B of the RBI Act, 1934 Housing Finance Institutions.
The Bank has exempted a non-banking financial company which is a housing finance institution as defined in Section 2(d) of the National Housing Bank Act, 1987 from the provisions of Chapter III B of the RBI Act, 1934.
2(ii) Merchant Banking company :
A merchant banking company has been exempted from the provisions of Section 45-IA [Requirement of registration and net owned fund], Section 45-IB [Maintenance of liquid assets] and 45-IC [Creation of Reserve Fund] of the RBI Act, 1934 , Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 and Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 subject to compliance with the following conditions:
a. It is registered with the Securities and Exchange Board of India as a Merchant Banker under Section 12 of the Securities and Exchange Board of India Act, 1992 and is carrying on the business of merchant Banker in accordance with the Securities and Exchange Board of India Merchant Banking (Rules) 1992 and Securities and Exchange Board of India Merchant Banking (Regulations) 1992;
b. acquires securities only as a part of its merchant banking business;
c. does not carry on any other financial activity referred to in Section 45I(c) of the RBI Act, 1934; and
d. does not accept or hold public deposits as defined in paragraph 2(1)(xii) of the Notification No. DFC 118/DG(SPT)-98 dated January 31, 1998.
2 (iii) Micro Finance Companies
Sections 45IA, 45IB and 45IC of the Reserve Bank of India Act, 1934 (2 of 1934) shall not apply to any non-banking financial company
which is
(a) engaged in micro financing activities, providing credit not exceeding Rs. 50,000 for a business enterprise and Rs. 1,25,000 for meeting the cost of a dwelling unit to any poor person for enabling him to raise his level of income and standard of living; and
(b) licensed under Section 25 of the Companies Act, 1956; and
(c) not accepting public deposits as defined in paragraph 2(1)(xii) of Notification No. 118 /DG(SPT)-98 dated January 31, 1998.
Mutual Benefit Companies
being a mutual benefit company as defined in paragraph 2(1) (ixa) of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 contained in Notification No. DFC.118/DG(SPT)-98 dated January 31, 1998). A "mutual benefit company" means a company not notified under section 620A of the Companies Act, 1956 (1 of 1956) and carrying on the business of a non-banking financial institution, -
on 9th January 1997; and
having the aggregate of net owned funds and preferential share capital of not less than ten lakhs of rupees; and
has applied for issue of certificate of registration to the Bank on or before 9th July 1997; and
is complying with the requirements contained in the relevant provisions of the Directions issued under Section 637A of the Companies Act, 1956 to Nidhi Companies by the Central Government.
2(iv) Government Companies
Sections 45IB and 45IC of the Reserve Bank of India Act, 1934 (2 of 1934), shall not apply to any non-banking financial company as defined in section 45-I(f) of the Reserve Bank of India Act, 1934 (2 of 1934) being a Government company as defined in section 617 of the Companies Act, 1956. A Government Company is a company in which not less than 51% of the paid up capital is held by the Central Government, or by any State Government or Governments or partly by the Central Government and partly by one or more State Governments and includes a company which is subsidiary of a Government Company as thus defined.
2(v) Venture Capital Fund Companies
Section 45-IA and Section 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934); Notification No. DFC.118/DG(SPT)-98 dated January 31, 1998; and Notification No. DFC.119 / DG(SPT)-98 dated January 31, 1998 shall not apply to a non-banking financial company, which is a venture capital fund company holding a certificate of registration obtained under Section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) and not holding or accepting public deposit as defined in paragraph 2(1)(xii) of the Notification No. DFC.118/DG(SPT)-98 dated January 31, 1998.
2(vi) Insurance/Stock Exchange/Stock Broker/Sub-Broker
The provisions of Section 45-IA, 45-IB, 45-IC, 45MB and 45MC of the Reserve Bank of India Act, 1934 (2 of 1934) and provisions of Non-Banking Financial Companies Acceptance of Public Deposit (Reserve Bank) Directions contained in Notification No. DFC.118 / DG(SPT)-98 dated January 31. 1998, the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 contained in Notification No. DFC. 119/DG(SPT)-98 dated January 31, 1998 shall not apply to any non-banking financial company not holding or accepting public deposit as defined in paragraph 2(1)(xii) of the Notification No. DFC.118/DG(SPT)-98 dated January 31, 1998, and -
(a) doing the business of insurance, holding a valid certificate of registration issued under Section 3 of the Insurance Act, 1938 (IV of 1938);
(b) being a stock exchange, recognised under Section 4 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) ; and
(c) doing the business of a stock-broker or sub-broker holding a valid certificate of registration obtained under Section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992)
2(vii) Nidhi Companies
The provisions of Sections 45-IA, 45-IB and 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934) shall not apply to any non-banking financial company
(a) Notified under Section 620A of the Companies Act, 1956 (1 of 1956), known as Nidhi Companies; and
Chit Companies
(b) doing the business of chits, as defined in clause (b) of Section 2 of the Chit Funds Act, 1982 (No. 40 of 1982).
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Raj Kumar Makkad
(Expert) 26 February 2010
The contension of the manager of that bank is erroneous and illegal. Refer the details submitted by vishal.
Sukhija
(Querist) 27 February 2010
Thanks Expert Vishal for ur valuable information.
In my case the company is alleged to have given loan to my client and my Question was to the company that 1.Ur company is not registered under RBI and do not possess license for carrying on the said business?
2.Ur company is not having license from Maharashtra Co op Societies Act?
The officer is replying that it is not required to have license.
The loan amount is 8 lakhs, in cash.Admittedly.
under what Act I can falsify him?
A V Vishal
(Expert) 27 February 2010
Is the company a Non Banking Financial Company or other than a Non Banking Financial Company.
Sukhija
(Querist) 27 February 2010
Non Banking Financial Company
A V Vishal
(Expert) 27 February 2010
A NBFC is a business entity whether incorporated under the Companies Act, 1956 or not which devotes its resources in providing to the society the financial services of various descriptions that are distinct from normal banking services.
NBFCs comprise the business organizations carrying on activities like
Hire Purchase Finance
Investment Activity
Loan granting activity
Mutual fund finance
Equipment Lease finance
Housing Finance
Insurance Business
NBFCs not falling under the above categories are called RESIDUARY NBFCs
In terms of S.45 of the NBFC Act, CoR is mandatory to carry on the business as a NBFC
