RBI extends ombudsman scheme to non-deposit taking NBFCs. - Pragnya IAS Academy - News Analysis

RBI extends ombudsman scheme to non-deposit taking NBFCs.

• It will help provide expeditious complaint redressal mechanism to customers.
• The ombudsman scheme was earlier operationalized for deposit-accepting NBFCs.

For expeditious redressal of complaints against deficiency in services concerning loans and other matters, the Reserve Bank of India (RBI) today extended the coverage of ombudsman scheme to non-deposit taking non-banking financial companies (NBFCs) having asset size of ₹100 crore or higher. It will help provide a cost-free and expeditious complaint redressal mechanism relating to deficiency in the services by NBFCs covered under the scheme.
The ombudsman scheme was earlier operationalized for deposit-accepting NBFCs. Now, it has been extended to include some other categories of NBFCs.
The non banking financial company-infrastructure finance company (NBFC-IFC), core investment company (CIC), infrastructure debt fund-non-banking financial company (IDF-NBFC) and an NBFC under liquidation, are excluded from the ambit of the Scheme.
The scheme also provides for an Appellate mechanism under which the complainant / NBFC has the option to appeal against the decision of the Ombudsman before the appellate authority. (Source: Livemint)


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RBI extends ombudsman scheme to non-deposit taking NBFCs.

RBI to ease registration process for NBFCs

Reserve Bank of India (RBI) has decided to simplify the registration process for non-banking finance companies (NBFCs).

What is a Non-Banking Financial Company (NBFC)?

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.

A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company).

NBFCs are doing functions similar to banks. What is difference between banks & NBFCs?

NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:

1.NBFC cannot accept demand deposits;

2.NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;

3.deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.

Objective of this move

The new application forms will be simpler and the number of documents required to be submitted will be reduced. The entire process could be made online for ease, speed and transparency.

Additional points

• The NBFC sector cannot be on a par with the banking sector and the central bank's stance is to harmonise and not equalise.
• Totally exempting small NBFCs from regulations may not be feasible from the customer service point of view.
• ''Make in India'' and ''Start Up'' businesses could offer fresh opportunities to NBFCs for growth.