The Reserve Bank of India cancelled the licences of as many as 35 Non-Banking Financial Companies (NBFCs) on Monday. In a statement issued by the RBI, the central bank said these companies will not be able to do the business of a non-banking financial institution from now on. The central bank has cancelled the licences of over 100 NBFCs this month alone. Some of them were either blacklisted or they stopped doing operations and surrendered their certificates to the RBI.
Before this, the RBI had cancelled the licences of as many as 25 NBFCs on July 25; 45 on July 19; 12 on July 20; and eight on July 23. Over 1,200 NBFCs flagged as "high risk" prone for not complying with a provision of the anti-money laundering law had submitted their records to the government in April to be identified as legally compliant.
Under the PMLA, the NBFCs, which include cooperative banks, are required to furnish details about the identity of their clients, maintain records and furnish the information to the Financial Intelligence Unit. Several NBFCs are facing closure for violation of these rules, but despite that these non-banking financial institutions are expected to grow at 19-21 per cent in the current financial year, while SME credit could see over 25 per cent growth, an ICRA report said.
Recently, the government MP Narender Jadhav told the Rajya Sabha that Chinese giant Alibaba had applied for NBFC licence in India through Paytm. There is a buzz that Flipkart is also looking to enter the financial services space to offer its customers as well as sellers a plethora of credit and insurance products. The Bengaluru-headquartered firm has started the process of applying for an NBFC licence, which will allow it to open lines of credit to its customers numbering around 10 crores and over 1 lakh sellers.
The NBFCs lend and make investments and, hence, their activities are akin to that of the banks. However, they can't accept demand deposits and do not form part of the payment and settlement system and cannot issue cheques drawn on themselves.