Premature Repayment Guidelines for NBFC Depositors | 13 Aug 2024

Source: BL

In a significant move to assist non-banking finance company (NBFC) depositors facing urgent financial needs, the Reserve Bank of India (RBI) has introduced guidelines allowing premature repayment of deposits under specific conditions.

• Premature repayment of deposits within three months is now permitted without interest, addressing emergencies like medical expenses or natural disasters  as notified by the concerned government or authority.
  • Tiny deposits (up to Rs 10,000) can be fully repaid at the depositor's request, while for other public deposits, up to 50% or Rs 5 lakh (whichever is lower) can be withdrawn.
  • In cases of critical illness, 100% of the principal can be withdrawn prematurely without interest.
• NBFCs must establish a system for acknowledging nomination requests, ensuring all customers are informed about their nomination status.
  • The notice period for deposit maturity has been reduced from two months to 14 days, enhancing communication with depositors.
• A NBFC is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of securities, insurance business, chit business. 
  • The key differences between banks and NBFCs are that NBFCs cannot accept demand deposits, do not form part of the payment and settlement system, and deposit insurance facility is not available to depositors of NBFCs.

Read more: RBI to Review NBFCs