Reserve Bank of India Act, 1934 | Chapter IIIB

Section 45-K: RBI Powers over Deposits of Non-Banking Institutions

Section 45-K of the Reserve Bank of India Act, 1934 authorises the Reserve Bank of India (RBI) to obtain information about deposits accepted by non-banking institutions, issue directions governing those deposits and, in specified cases, prohibit further acceptance of deposits. It also provides for circulation of annual accounts to certain depositors when required by the RBI.

Scope of Section 45-K

The term non-banking institution is defined under Section 45-I(e) of the Act and is broader than the category of non-banking financial companies (NBFCs). The statutory meaning of deposit, including exclusions, is provided under Section 45-I(bb). Section 45-K must be read with these definitions and applicable RBI notifications, directions and exemptions.

Power to call for deposit information - subsections (1) and (2)

The RBI can require non-banking institutions to furnish statements, information or particulars about deposits. The RBI may prescribe the form, frequency and deadline by a general or special order. Information may include deposit amounts, purposes, tenures, interest rates and other terms and conditions. The information-gathering power is not confined to a single type of deposit product.

Directions and prohibition on accepting deposits - subsections (3) and (4)

Where the RBI considers it necessary in the public interest, it may issue directions generally or to a particular institution or group of institutions regarding the receipt of deposits. Such directions may govern the interest payable and the periods for which deposits are accepted. Under subsection (4), if an institution fails to comply with a direction under subsection (3), the RBI may prohibit it from accepting deposits. A prohibition is a regulatory consequence of non-compliance; the exact effect depends on the operative RBI direction or order.

Annual financial statements for depositors - subsections (5) and (6)

Subsection (5) was omitted by the Reserve Bank of India (Amendment) Act, 1974. Under subsection (6), when the RBI so requires, a deposit-taking non-banking institution must send a copy of its annual balance sheet and profit and loss account, or other annual accounts, at its own expense, within the specified time, to each depositor whose deposit balance at the relevant year-end exceeds the amount specified by the RBI.

How Section 45-K works alongside other RBI powers

Section 45-J deals with the issue of advertisements or prospectuses soliciting deposits. Section 45-JA concerns policy and directions for NBFCs, while Section 45-L deals with information and directions relating to financial institutions. These provisions have different statutory scopes and should not be treated as interchangeable.

Section 45-K - statutory provisions

The following reproduces the substantive provisions from the original page, with an editorial correction to the closing bracket of the omission note.

(1) The Bank may at any time direct that every non-banking institution shall furnish to the Bank, in such form, at such intervals and within such time, such statements, information or particulars relating to or connected with deposits received by the non-banking institution, as may be specified by the Bank by general or special order.

(2) Without prejudice to the generality of the power vested in the Bank under sub-section (1), the statements, information or particulars to be furnished under sub-section (1) may relate to all or any of the following matters, namely, the amount of the deposits, the purposes and periods for which, and the rates of interest and other terms and conditions on which, they are received.

(3) The Bank may, if it considers necessary in the public interest so to do, give directions to non-banking institutions either generally or to any non-banking institution or group of non-banking institutions in particular, in respect of any matters relating to or connected with the receipt of deposits, including the rates of interest payable on such deposits, and the periods for which deposits may be received.

(4) If any non-banking institution fails to comply with any direction given by the Bank under sub-section (3), the Bank may prohibit the acceptance of deposits by that non-banking institution.

(5) [Omitted by the Reserve Bank of India (Amendment) Act, 1974.]

(6) Every non-banking institution receiving deposits shall, if so required by the Bank and within such time as the Bank may specify, cause to be sent at the cost of the non-banking institution a copy of its annual balance-sheet and profit and loss account or other annual accounts to every person from whom the non-banking institution holds, as on the last day of the year to which the accounts relate, deposits higher than such sum as may be specified by the Bank.

Official legislation and RBI resources

The statutory powers described here do not replace the need to examine currently applicable RBI directions for a particular category of institution and deposit product.