Liquid Assets (Non-Banking Finance Companies) Trustees Guidelines

Liquid Assets – Trustees Guidelines

1. These Guidelines may be called the Reserve Bank of India Guidelines for Trustees of deposit-holders of the deposit taking NBFC.

2. No company/bank shall be entitled to act as a Trustee of deposit-holders unless it is a scheduled commercial bank or limited company engaged in trust business with minimum capital of Rs. 50 lakhs and who are independent and have no relationship with the company its principal shareholders or Directors of the company.

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3. The duties of every trustees of deposit-holders will be:

(i) To execute the trust deed with the company for the protection of interest of the deposit-holders.

(ii) To do the duties of the trustees as enshrined in the Trust Deed executed with the company.

(iii) To take possession of the property charged in accordance with the provisions of the trust deed.

(iv) Enforce security in the interest of deposit-holders.

(v) To do such acts or as are necessary in the event the security becomes enforceable.

(vi) To carry out such acts as are necessary for the protection of interest of the depositors.

(vii) Ascertain and satisfy himself that the

a) The interest due on the deposits had been paid by the one person company registration in coimbatore on or before the due dates.

b) The deposit-holders had been paid the monies due to them on the date of maturity of the deposit.

(c) Exercise due diligence to ensure compliance by the company of the provisions of the trust deed.

(d) To take appropriate measures for protecting the interest of the deposit-holders, as soon as any breach of the trust deed comes to the notice.

(e) To inform the Reserve Bank of India as soon as any breach of the trust deed comes to his notice.

(f) To communicate with the Regional Office of RBI, under whose jurisdiction the one person company registration in coimbatore is registered, on half-yearly basis the compliance of trust deed by the company, defaults if any in payment of interest to the deposit-holders and action taken.

4. The trustees for the deposit-holders shall call or cause to be called by the company a meeting of all deposit-holders.

(a) On a requisition in writing signed by at least 51% of the deposit-holders in value for the time being outstanding.

(b) The happening of any event which constitutes a default for which in the opinion of the trustees the security of the deposit-holders is in jeopardy.

A report of such meeting may be forwarded to the Regional Office of the Reserve Bank of India, Department of Non-Banking Supervision under whose jurisdiction the company is registered.

5. The trustee may inspect books of account, records, register of the company and the trust property to the extent necessary for discharging his obligations with prior intimation to the Regional Office of RBI in whose jurisdiction the NBFC is registered.

6. The trustees for deposit-holders shall not make untrue statement or suppress any material in any documents, reports, papers or information furnished to the Reserve Bank of India.

7. The trustee for deposit-holders shall ensure that the Reserve Bank of India is promptly informed about any action, legal proceedings etc. initiated against him in respect of any material breach or non-compliance by it, of any law, rules directions of the Reserve Bank of India or of any other regulatory authority.

8. The trustee for deposit-holders shall not delegate any of his functions to any employee or agent. However, the trustee may employ employees, agents, Advocates or any other professional for any routine or clerical functions. In case the trustee employs any employee, he will be responsible for his/their acts or omissions in respect of the conductof his/their business.

Minimum lock-in period and Repayment in the event of death of the depositor

No NBFC should grant any loan against a public deposit or make premature repayment of a public deposit within a period of three months (lock-in period) from the date of its acceptance. But in the event of death of a depositor, a NBFC should repay the public deposit prematurely, even within the lock – in period, to the surviving depositor/s in the case of joint holding with survivor clause, or to the nominee or the legal heirs of the deceased depositor, on the request of the surviving depositor/s/nominee/legal heir, and only against submission of proof of death, to the satisfaction of the company.

Repayment of public deposits by a non-banking financial company not being a problem NBFC

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Subject to the provisions contained in paragraph 23 of these Directions, a NBFC not being a problem NBFC may,

i) Permit premature repayment of a public deposit at its sole discretion: Provided such NBFC should, if so permitted by the terms and conditions of acceptance of such deposit, repay it prematurely at the request of the depositor, after the expiry of three months from the date of deposit,

ii) Grant a loan up to seventy-five percent of the amount of public deposit to a depositor after the expiry of three months from the date of deposit at a rate of interest two percentage points above the interest rate payable on the deposit.

Repayment of public deposits by a problem non-banking financial company

Subject to the provisions contained in paragraph 23, in order to enable a depositor to meet expenses of an emergent nature, a problem non-banking financial company may make premature repayment of, or grant a loan against, a public deposit in the following cases only, namely:

i) Repay a tiny deposit in entirety or repay any other public deposit up to an amount not exceeding Rs.10, 000/-; or

ii) Grant a loan against a tiny deposit or up to an amount not exceeding Rs.10,000/- against any other deposit, at a rate of interest two percentage points above the interest rate payable on the deposit.

Clubbing of deposits by a problem non-banking financial company

All deposit accounts standing to the credit of sole/first named depositor in the same capacity shall be clubbed and treated as one deposit account for the purpose of premature repayment or grant of loan by a problem non-banking financial company. This provision will not apply to premature repayment in the event of death of depositor as provided in paragraph 23 of these directions.

Rate of interest on premature repayment of public deposits

Where a non-banking financial company, whether at its sole discretion or at the request of the depositor, as the case may be, repays a public deposit after three months from the date of its acceptance, but before its maturity (including premature payment in the case of death of the depositor), it shall pay interest at the following rates:

  • After 3 months but before 6 months – No interest applicable.
  • After 6 months but before the date of maturity – The interest payable shall be 2 per cent lower than the interest rate applicable to a public deposit for the period for which the public deposit has run or if no rate has been specified for that period, then 3 percent lower than the minimum rate at which public deposits are accepted by the NBFC.

Intimation of maturity of deposits to depositors

All NBFCS should intimate the details of maturity of the deposit to the depositor at least two months before the date of maturity of the deposit.

Renewal of public deposit

Where a non-banking financial company permits an existing depositor to renew the deposit before maturity for availing of the benefit of higher rate of interest, such company shall pay the depositor the increase in the rate of interest provided that,-

 i) The deposit is renewed in accordance with the other provisions of these directions and for a period longer than the remaining period of the original contract; and

ii) The interest on the expired period of the deposit is reduced by one percentage point from the rate which the company would have ordinarily paid, had the deposit been accepted for the period for which such deposit had run; any interest paid earlier in excess of such reduced rate is recovered/adjusted.

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