Rbi act - nbfc

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charmi (Querist)
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02 August 2013 Today I received a notice from RBI as follows

"..... SECURITIES PRIVATE LIMITED

Section 45-IA of RBI Act: undertaking business of NBFI

Dear Sir/Madam

During analysis of balance sheet and profit & loss account of your company, prima facie it appears that your company is undertaking the business of Non-Banking Financial Institution (NBFI) as defined under Section 45-I (a) read with Sections 45-I (c) and 45-I (f) of the Reserve Bank of India Act, 1934, without obtaining Certificate of Registration (CoR) from Reserve Bank of India. In terms of Section 45-IA of the Act, no company can commence or carry on the business of Non-Banking Financial Company without obtaining a Certificate of Registration (CoR) from RBI. You are, therefore, advised to offer your comments in this regard. In case you are registered with any authority, please send us copy of registration certificate.

2. Further, we advise you to bring down the percentage of Financial Assets to Total Assets and Financial Income to Total Income below 50% and submit a Statutory Auditors certificate to that effect. Please send e-mail address of statutory auditors.

3. You may further note that commencing or carrying on the business of NBFI without a valid CoR may attract the penal provisions under Section 58B(4A) of the RBI Act, 1934 which reads as under:-

“If any person contravenes the provisions of sub-section (1) of Section 45-IA, he shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to five years and with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees”.

4. Your reply should reach this office by e-mail at dnbsmro@rbi.org.in or post/courier/hand delivery within 15 days from the date of receipt of this e-mail.

With regards

Department of Non-Banking Supervision

Reserve Bank of India"

The company's capital is Rs.15lakhs and has investment of Rs.15lakhs.

How do I go about in this matter?

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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02 September 2013 This is a very dangerous matter and there are chances that the directors may be arrested as without procuring RBI licence NBFC activities cannot be carried out. You apply for RBI Licence immediately and discontinue the business

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