What changed
RBI inserted clause (10A) into the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998, via Notification No. DNBS 258/CGM (CRS)-2013 dated July 04, 2013, specifying a procedure for deposits seized or frozen by government authorities. Previously, there was ambiguity on interest payment for such deposits. The new clause mandates obtaining a renewal request from the customer, renewing for the original term if no choice is given, and holding interest in a separate sub-account until government clearance.
What it means for you
NBFCs now have a clear, compliant path to handle interest on deposits under government seizure or freeze. They must actively communicate with customers and authorities, and cannot release funds without clearance. This reduces legal risk and ensures uniform treatment across the sector.
What you must do
- Obtain a written renewal request from the depositor at maturity, asking them to specify the renewal term.
- If the depositor does not choose a term, renew for the original term and note it in the deposit ledger without issuing a new receipt.
- Advise the concerned government department via registered post/speed post/courier about the renewal, and inform the depositor of the renewed interest rate.
- If the overdue period on the request date exceeds 14 days, pay interest for the overdue period as per your policy and keep it in a separate interest-free sub-account.
- Release principal and accrued interest only after obtaining clearance from the respective government agency.
Who it affects
All NBFCs accepting public deposits, Depositors whose deposits are seized or frozen by enforcement authorities, Government enforcement agencies dealing with such deposits
What if the depositor doesn't specify a renewal term?
Renew the deposit for a term equal to the original term. No new receipt is needed, but make a note in the deposit ledger.
When can we release the principal and interest?
Only after obtaining clearance from the respective government agency. The interest accrued during the overdue period must be kept in a separate interest-free sub-account until then.