The Reserve Bank of India (RBI) has mandated non-banking financial companies (NBFCs) to pay 100 percent of the deposit amount within the first three months of accepting it if the depositor seeks a withdrawal citing an emergency. But the depositor will not get any interest on premature withdrawals, the RBI added.
Issuing the revised regulations governing NBFCs and housing finance companies (HFCs) on Monday, the central bank said the new norms will be applicable from January 1, 2025.
The definition of "critical illness" set by insurance regulator Irdai will be a guide on whether a request qualifies under the category, the central bank added.
“...in cases of critical illness, 100 percent of the amount of the principal sum of deposit may be prematurely paid to individual depositor on request, before the expiry of three months from the date of acceptance of such deposits, without interest," the central bank said in a notification that has reviewed the regulatory framework for housing finance companies (HFCs) and harmonisation of regulations applicable to HFCs and NBFCs.
It has specified that expenses relating to an emergency include a medical emergency or expenses due to natural calamities or a disaster as notified by the government. If the money is not sought for an emergency and a premature withdrawal is sought within three months, NBFCs can pay up to 50 percent of the deposit without paying any interest. However, not more than 50 percent of the amount of the principal deposit or Rs 5 lakh, whichever is lower, may be prematurely paid, it added.
The RBI has also asked NBFCs to ensure that their audit committees conduct an information system audit. The central bank said it has reviewed regulations applicable to housing finance companies and NBFCs to harmonise the rules for them.
Accordingly, it has announced changes on minimum percentage of liquid assets, which specifies that all deposit taking HFCs shall maintain liquid assets to the extent of 15 percent of the public deposits as against 13 percent right now.
HFCs shall ensure that full asset cover is available for public deposits accepted by them at all times, and ensure that they get the investment grade rating at least once a year.
Home lenders "shall not renew existing deposits or accept fresh deposits thereafter till they obtain an investment grade credit rating," it added.
Public deposits accepted or renewed by HFCs shall be repayable after 12 months or more but not later than 60 months, it said.
It has also aligned the rules on branches and appointment of agents to collect deposits, under which HFCs having branches or agents outside the state of its registration shall not accept fresh deposits or renew existing deposits in these branches if they do not meet certain conditions.