While an RBI spokesperson declined to comment, sources close to the discussions said that the regulator was only hearing the NBFC's case following an order from the Supreme Court. What it intends to following the hearing is unclear at present.
Today, Roy entered the RBI headquarters a little after 2 pm and ended the meeting after 9 in the evening. This was the second meeting following discussions on June 12.
Earlier this month, the central bank had barred Sahara India Financial Corporation from accepting fresh deposits from the public for violation of the prescribed guidelines. The NBFC has over 25 million depositors, who have 42.5 million accounts, with a cumulative deposit base of around Rs 18,000 crore.
In its statement on June 4, the RBI had said the violations are related to maintenance of directed investments, payment of minimum interest rate, asset-liability management guidelines, and know-your-customer (KYC) norms. Another violation pertained absence of information at the time of maturity of deposits.
Sahara immediately approached the Allahabad High Court challenging the order on the grounds that it was not given a fair hearing. The Lucknow Bench of the high court then stayed the order, prompting the RBI to move the Supreme Court to get the stay vacated.
On May 9 this year, the RBI had issued a show cause notice to Lucknow-based Sahara. Sahara first held detailed discussions on May 20 and subsequently replied to the notice on June 2. Two days later, the RBI enforced the ban.
In its petition to the Supreme Court, whose order was put on its website today, RBI's counsel T R Andhyarujina had argued that the High Court had stayed the regulator's decision without even granting it any opportunity to present its case.
He had also said that Sahara had been given "ample opportunities" and "infirmities committed" by the finance company had been highlighted in the show cause notice.
"With reference to the show cause notice dated May 9, 2008 and June 4, 2008 it is submitted that several illegalities have been committed and there is total lack of transparency in the functioning of respondent number 1 (Sahara)," RBI told the Supreme Court.
