Sahara India Finance barred from raising deposits

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Mumbai, Jun 5 (UNI) The Reserve Bank of India (RBI) has barred Sahara India Finance Corporation, one of the country's biggest deposit-taking NBFCs, from raising fresh money from the public with immediate effect.

The central bank has asked Sahara India Finance to lodge all securities held in its custody with a designated bank. The decision was taken in public interest and to protect the interest of the depositors.

In its response, Sahara India Finance, the Lucknow-based residuary non-banking company, has termed the RBI order as ''legally unsound, wanting in prudence and application of mind''. The company also said it will soon initiate a legal challenge.

Sahara India Finance also added that depositors would be paid as and when their deposits mature.

The RBI has also asked Sahara India Finance to notify all its agents and employees that it has been prohibited from accepting deposits, and shall paste a copy of the order in a conspicuous place at each of its branches and offices.

Unlike non-banking finance companies (NBFCs), whose deposit mobilisation is linked to their net-owned funds, RNBCs have no cap on the quantum of deposits they can raise but are required to follow a strict investment regime. Under this, RNBCs are allowed to use their discretion to invest only 20 per cent of the money. In April 2007, the RBI had scrapped this discretionary investment headroom for Sahara India Finance.

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