NBFCs or Non Banking Finance Companies are engaged in various lending activities and mainly source money from banks and money markets. These firms lend to real estate companies and also give gold and housing loans, among other products.
The Reserve Bank of India (RBI) has cancelled the certificate of registration of seven non-banking finance companies. These include Malpani Financial Services Private Limited, Vishav Dealer Private Limited, U K Fin Services Limited, Prabhat (India) Limited, Compusta Securities Private Limited, Harshant Investments Private Limited and Sajjan Commercial Enterprises Ltd.
These companies shall not transact the business of a non-banking financial institution, the RBI said in a press release on October 29. The central bank has been tightening monitoring and scrutiny of non-banking firms over the years as these companies are considered high-risk in nature and more prone to shocks during an economic downturn.
In 2018 November, the RBI had cancelled the registration of 33 NBFCs. In January 2019, the RBI cancelled licences of 32 NBFCS and in May, 2020, the regulator cracked the whip on 14 NBFCs.
Many NBFCs faced a liquidity crunch after the 2018 IL&FS crisis and later the DHFL episode. Banks turned wary of taking further exposure to NBFCs and money markets favoured only top-rated companies.
The RBI said two NBFCs have surrendered their certificate of registration. These are Hyderabad-based Snehalata Finance Limited and Kanpur-based Jagran Media Network Investment Private Limited.
Report – Vikas Chandra Agarwal