Investing in FDs with an NBFC? Check new RBI rules on premature withdrawal, nominations applicable from Jan 1, 2025
Aug 14, 2024
Synopsis
New FD rules: The revised guidelines cover topics such as the acceptance of public deposits, including regulations concerning nominations, reimbursement of public deposits for urgent expenses, informing depositors about deposit maturity, and others.
The Reserve Bank of India (RBI) has issued a revised regulatory framework circular relating to HFCs (Housing finance companies) and NBFCs (Non-banking Finance Companies) on August 12, 2024. The revised guidelines include acceptance of public deposits like those relating to nominations, repayment of public deposit to meet certain expenses of an emergent nature, intimation of maturity of deposits to depositors and more.
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“Accordingly, based on a review of the extant regulations applicable to HFCs prescribed vide Master Direction – Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021, it has been decided to issue revised regulations as detailed in the Part A of Annex. As part of the exercise, certain regulations applicable to NBFCs have also been reviewed and revised regulations are detailed in Part B of Annex. The revised regulations shall be applicable with effect from January 01, 2025,” stated the RBI circular.
Here is a look at the revised RBI guidelines regarding the acceptance of public deposits for NBFCs.
Nomination
It is currently recommended that NBFCs develop an appropriate mechanism for acknowledging receipt of a properly completed form of nomination, cancelation, and/or variation of the nomination. Such acknowledgment should be provided to all customers, regardless of whether they want it.
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Nominee in the passbook
NBFCs should implement the practice of recording the position regarding the availment of the nomination facility on the face of the passbooks/receipts with the legend "Nomination Registered," as well as the name of the Nominee in the passbook/receipt, if the customer agrees to it.
Premature payment
Tiny deposits may prematurely be paid to individual depositors, at the request of the depositor, before the expiry of three months from the date of acceptance of such deposits, in entirety, without interest;
According to the RBI circular, “ In case of other public deposits, not more than fifty per cent of the amount of the principal sum of deposit or Rs 5 lakh, whichever is lower, may be prematurely paid to individual depositors, at the request of the depositors, before the expiry of three months from the date of acceptance of such deposits, without interest; the remaining amount with interest at the contracted rate shall be governed by the provisions of the extant directions as applicable for public deposits”
Critical illness
In case of critical illness 100% of the amount of the principal sum of deposit, will be prematurely paid to individual depositors, at the request of the depositors, before the expiry of three months from the date of acceptance of such deposits, without interest.
Note that the amount as per these provisions will also apply to the existing deposit contracts wherein the individual depositor does not have a right to premature withdrawal of the deposit before the expiry of three months.
Intimation of maturity of deposits
Earlier, NBFCs must notify depositors about the deposit's maturity date at least two months in advance. It has been decided to shorten the term from two months to fourteen days. As a result, the NBFC must notify the depositor of the deposit's maturity date at least 14 days in advance.
[The Economic Times]
