The Reserve Bank of India on Wednesday said non-banking finance companies not having the minimum net-owned fund of Rs 25 lakh (Rs 2.5 million) as on January 9 will not be allowed to continue with their business.
"NBFCs, which have not achieved the minimum NOF of Rs 25 lakh by January 9, 2003, are not entitled to continue the business of a non-banking financial institution beyond that date notwithstanding that the application of such a company for certificate of registration is pending with RBI," the banking regulator said in a statement.
RBI said the decision, under the Section 45-IA of its Act, was yet to be communicated to the NBFCs.
However, NBFCs, which had achieved the minimum NOFÂ of Rs 25 lakh could carry on with their business until a certificate of registration was issued or rejection of application for registration was communicated to them, the statement said.
Giving a stern warning, RBI said if any person contravene the provisions, he shall be punishable with imprisonment for a term which shall not be less than one year but extending to five years with a fine of not less than Rs 100,000 extending to Rs 500,000.
NBFCs, not having minimum NOF as on January 9, 1997, were allowed to fulfill the requirement of NOF and carry on the business of non-banking financial institution up to three years (which period had expired on January 9, 2000) or till such period extended by RBI to them, the statement said.
In terms of the provisio to Section 45-IA(3), RBI could, however, consider extension of time only up to a period not exceeding, in aggregate, six years from the date of commencement of RBI (Amendment) Act of 1997 (January 9, 1997) and such period had also expired on January 9, 2003, it said.
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