The Reserve Bank of India (RBI) has raised concerns on Kerala-based Manappuram Finance for acceptance of deposits.
The RBI stated that acceptance of deposits either by Manappuram Finance or by Manappuram Agro Farms (MAGRO) is punishable with imprisonment and has cautioned members of the public that those who deposit money with Manappuram Finance or MAGRO do so at their own risk.
Under the RBI Act, 1934, Manappuram Finance is not permitted to accept or renew deposits from the public.
Manappuram Finance was a company registered with the RBI as a deposit taking non-banking financial company. However, it became a non-deposit taking non-banking financial company with effect from March 22, 2011.
Acceptance of deposits from the public, including renewal of matured deposits by that company thus amounts to contravention of the terms and conditions of the certificate of registration currently held by it and the directions issued by the RBI and thus punishable under the RBI Act, the central bank said.
The RBI found out that Manappuram Finance has been accepting deposits from the public in its branches and offices, and issuing deposit receipts in the name of Manappuram Agro Farms (MAGRO), a sole proprietary concern of VP Nandakumar who is the executive chairman of the company.
It was further observed by RBI that in some cases instead of repaying the matured deposits, fixed deposit receipts were being issued in the name of MAGRO. In terms of Section 45-S of the RBI Act, acceptance of deposits from the public by MAGRO, which is an unincorporated body, is also prohibited, said RBI.
However, Manappuram Finan-ce’s managing director, I Unnikrishnan refuted the allegation and said the company does not accept any public deposits.
“It is accepting investments through secured non-convertible debentures (NCDs) and subordinate bonds which do not fall under the definition of public deposits,” Unnikrishnan said in a press release issued by the company.
He also clarified that the company was earlier classified as a deposit taking NBFC and later re-categorised as a non-deposit taking NBFC in 2011 by the regulator upon a request made by the company. This followed a decision taken by its board. “Existing depositors of the company at that time were mostly repaid (with interest) prior to the re-categorisation. The balance portion of the deposits was held in an escrow account with Punjab National Bank, Thrissur (Kerala) branch and this was informed to RBI on March 11, 2011,” said Unnikrishnan.