The Lok Sabha yesterday passed the Reserve Bank of India (amendment) bill, 1997, amid a walkout by the Bharatiya Janata Party. Finance minister P Chidambaram gave an assertion that the bill, which seeks to regulate financial intermediation and make it mandatory for non-banking finance companies (NBFCs) to register with RBI, would not have an adverse impact on the rural economy.
Replying to the debate on the bill, the finance minister said the proposed provisions would not restrict money lending, but prohibit deposit mobilisation for lending purposes. A statutory resolution seeking disapproval of the ordinance promulgated on January 9 which the bill seeks to replace and opposition amendments were negatived by a voice vote. However, an official amendment to cut the net owned fund of an NBFC from Rs 50 lakh to Rs 25 lakh was approved by the House. Chidambaram pointed out that most of the provisions were already there in the parent act and the amendment only sought to tighten the activities of NBFCs.
The bill also provides for creation of a reserve fund, transfer of a certain percentage of profits every year to the fund, and prescription of liquidity requirement.
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The bill vests the RBI with powers to issue guidelines encompassing income recognition, accounting standards, provision for bad and doubtful debts, and capital adequacy. The finance minister moved another amendment to extend the period for repayment of the deposit from two to three years with the RBI governor having the power to extend it by a year. Chidambaram said people had been duped by unscrupulous deposit takers in Tamil Nadu, Kerala, Andhra, MP, UPand Bihar. The amendment would stop such practices. Under the bill, RBI will be empowered to issue directions to the auditors of NBFCs to order special audits, prohibit taking of deposits by NBFCs, and file winding up applications. Earlier, the only recourse available to the depositor was to approach a court of law for redressal of grievances. But powers have now been vested with the CLB for directing the defaulting NBFCs to make repayment of the deposits to protect the interest of depositors.
Unincorporated bodies have been prohibited from accepting deposits for the purpose other than personal use. They have been permitted to take deposits after incorporating themselves within the regulatory framework. The unincorporated bodies have also been specifically prohibited from issuing advertisements.