Lok Sabha Question No. 5718 (UNSTARRED), answered on 2017-04-07
Subject: Private Financial Companies
Ministry: CORPORATE AFFAIRS
Asked by: V. SATHYABAMA

## GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS

LOK SABHA UNSTARRED QUESTION NO. 5718 ANSWERED ON FRIDAY, THE 07TH APRIL, 2017 [CHAITRA 17, 1939 (SAKA)]

## PRIVATE FINANCIAL COMPANIES

## QUESTION

5718. SHRIMATI V. SATHYA BAMA:

Will the Minister of CORPORATE AFFAIRS be pleased to state:

- (a) whether the Government has issued any orders to private financial institutions and private limited finance companies in the country to govern the issue of loans and collection of interests;
- (b) if so, the details thereof;
- (c) whether some private limited finance companies have been involved in unethical and fraudulent acts and if so, the details thereof; and
- (d) the  stringent  steps  taken  by  the  Government  to  book  and  punish directors of such companies for committing fraud?

## ANSWER

THE MINISTER OF STATE IN THE                   (SHRI ARJUN RAM MEGHWAL) MINISTRY OF CORPORATE AFFAIRS

(a) & (b): Non-banking Finance Companies (NBFCs), incorporated under the  Companies  Act,  are  regulated  by  Reserve  Bank  of  India  (RBI).  As informed by RBI, the interest rates of lending have been deregulated for banks and NBFCs.  A cap on interest rate is specified only for NBFC-MFIs. In  respect  of  NBFCs,  the  RBI  has  issued  guidelines  through  the  Fair Practices Code that require the Board of NBFCs to adopt an interest rate model taking into account relevant factors such as cost of funds, margin and risk premium and determine the rate of interest to be charged for loans and advances. Further, the rate of interest and the approach for gradations of  risk  and  rationale  for  charging  different  rate  of  interest  to  different categories  of  borrowers  is  required  to  be  disclosed  to  the  borrower  or customer in the application form and also to be communicated explicitly the  in  sanction  letter.  This  ensures  transparency  in  computation  and communication of interest rates charged by NBFCs. (c) & (d): The details provided by RBI are enclosed as per Annexure -I. *******

## Annexure-I

## ANNEXURE REFERRED TO IN REPLY TO PARTS (c) & (d) OF THE UNSTARRED QUESTION NO. 5718 FOR ANSWER IN LOK SABHA ON 07.04.2017

| State/UT   | Cases where private limited NBFCs registered with RBI were found to be involved in unethical/fraudulent practices                                                                            | Action taken in this regard                                                                                                                         |
|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
| Gujarat    | Deep Capital Services Private Ltd. Company was involved with Jai Khodiyar Mirta Mandal (JKMM), an Unincorporated Body (UIB), which was involved in illegal collection of money               | CoR of company was cancelled and winding up petition has been initiated against the company. Also FIR is filed against the company                  |
| Assam      | YVU Financial Services Pvt. Ltd. violated directions relating to collection of insurance premium at flat rate and charged a high rate of interest as compared to the prevalent market rates. | YVU Finance Services Pvt. Ltd has been penalized with an amount of Rupees Five lakh on August 08, 2014 by Reserve Bank of India for the violations. |

*****