What changed
Earlier, NBFCs faced practical difficulties in creating a charge on statutory liquid assets in favor of a large number of depositors. Now, RBI permits using a trust deed mechanism to create the charge on behalf of depositors collectively. The trust deed and trustee guidelines are provided as annexures.
What it means for you
This simplifies compliance for NBFCs by replacing individual depositor charges with a single trust-based arrangement, reducing administrative burden. Banks and lenders dealing with NBFCs should note that the statutory liquid assets remain secured for depositors, but the charge is now held through a trustee. All other provisions of the earlier circular continue to be in force.
What you must do
- Ensure your NBFC creates a floating charge on statutory liquid assets via a trust deed by March 31, 2007.
- Register the charge with the Registrar of Companies and inform trustees and RBI.
- Place this circular before your Board of Directors and implement the system.
- Acknowledge receipt and report compliance to your regional RBI office.
Who it affects
All deposit-taking NBFCs (excluding Residuary Non-Banking Companies), Trustees appointed for managing the charge on behalf of depositors, RBI regional offices monitoring compliance
What is a floating charge on liquid assets?
It is a security interest over the pool of statutory liquid assets (like government securities or bank deposits) that NBFCs must maintain under Section 45-IB of the RBI Act. The charge floats over the assets, allowing the NBFC to manage them normally, but crystallizes if the NBFC defaults.
Why did RBI introduce the trust deed mechanism?
NBFCs faced practical difficulties in creating a charge on the statutory liquid assets in favor of a large number of depositors. The trust deed simplifies this by appointing a trustee to hold the charge on behalf of all depositors collectively.
What is the deadline for compliance?
The system must be put in place by March 31, 2007. NBFCs must also acknowledge receipt of the circular and report compliance to their regional RBI office.