Govt cracks the whip on 9,500 ‘high-risk’ NBFCs
Publishes names of firms not complying with anti-money laundering law
In a major crackdown on black money in the country, the finance ministry has laid out a list of nearly 9,500 non-banking financial companies (NBFCs) as 'high risk financial institution' as they have not complied with a stipulated provision of the anti-money laundering law.
A list of 9,491 "high risk financial institutions" has been published by the Financial Intelligence Unit (FIU) that works under the Union Finance Ministry to check crimes in the Indian economy and alert enforcement agencies against such instances.
Under the Prevention of Money Laundering Act (PMLA), the NBFCs, which includes cooperative banks, are required to furnish details about their financial operations and transactions to the FIU.
There are about 12,000 NBFCs in the country at present, according to RBI records.
The FIU processed the data of these companies and found that they did not comply largely on one stipulated condition of appointing a principal officer who is responsible to check and report suspicious transactions and cash transactions of Rs 10 lakh and above, and report it to the agency, sources said.
The activities of these institutions — post the demonetisation of large currency notes of Rs 1,000 and Rs 500 in November, 2016 — were under the scanner of the FIU and it published their names after analysing their data from various information sources, they said.
"The publication of names is primarily a step by the FIU to make aware the public that these NBFCs are not law compliant and that they should refrain from indulging into transactions with them," a senior official said.
As per the Prevention of Money Laundering Act (PMLA), all NBFCs have to appoint a principal officer in the financial institutions and report all suspicious and cash transactions of over ten lakh rupees to the FIU.
But, these companies have been found not following these rules as on January 31, 2018. The FIU released the list on its website showing the names of NBFCs which have been found non-compliant to the PMLA rules.
The list includes Purshottam Invest of in and Shalibhadra Finance Ltd, which were Dalal Street darlings last year with their share prices surging 322 per cent and 120 per cent in the past year.
Adani Capital Private Ltd, Tata Capital Ltd, Tata Industries, Anand Corporate Holdings Pvt. Ltd., Arihant Udyog Ltd., Asian Financial Services Ltd., Avon Money Solution India Ltd, Bindal Finvest., Bombay Gas Co Ltd., Cello Capital Private Limited, DLF Finvest Ltd, Eros Merchants (P) Ltd, and Indigo Fincap Pvt Ltd are few of the companies listed by FIU.
NBFC is defined as a company registered under the Companies Act which is engaged in the business of loans and advances, acquisition of shares, stocks, bonds, debentures and securities issued by the government or local authority or other marketable securities.
After demonetisation in 2016, NBFCs and several other rural and urban cooperative banks had come under the scanner of the Income Tax Department and the Enforcement Directorate (ED) for illegally converting banned currency notes. (ANI)
NBFCs lend and make investments and hence, their activities are akin to that of banks, however, there they cannot accept demand deposits and do not form part of the payment and settlement system and cannot issue cheques drawn on itself. Last week the Reserve Bank of India (RBI) launched the Ombudsman Scheme for NBFCs aimed at grievance redressal. "The scheme will provide a cost-free and expeditious complaint redressal mechanism relating to deficiency in the services by NBFCs covered under the scheme," RBI said.