Following the RBI’s request and rampant activities of non-banking finance companies (NBFCs), the Government has sent a formal request to the Jharkhand High Court to setup designated courts in the State to deal with financial fraud cases. The request has been made under the provisions of the Jharkhand Protection of Interest of Depositors (in Financial Establishments Act), 2011 or PID Act.
The designated courts are more likely to come up in the districts suffering the most from illegal and unregulated activities of the NBFCs and chit fund companies that have been indulging into collection of public deposits and then vanish from the scene to only dupe the depositors’ hard earned money.
“The designated courts are to be setup among the existing courts only by marking them as special courts for NBFCs. We have requested and after getting consent of the High Court the courts would be setup since there is no provision of a separate court under PID Act. The districts witnessing greater number of cases relating to financial frauds are likely to get the designated courts first,” Amit Khare, Additional Chief Secretary in the Planning and Finance Department told The Pioneer.
Moreover, a high-level meeting of State-level Coordination Committee (SlCC) on NBFCs had also taken place recently in which a decision to establish such courts under the PID Act was taken. The forum is of the regulators of NBFCs that involves RBI, Security and Exchange Board of India, Registrar of Companies, National Housing Bank besides, law enforcement agencies.
SlCC has also suggested the State Government to sensitise the intelligence machinery for collection of inputs on economic offences in the State for early warnings and timely action to protect the interest of common depositors.
Moreover, despite the regulatory mechanisms cases of frauds are coming from across the State. As per the records with the RBI regional office meant for Bihar and Jharkhand, only 20 NBFCs have been registered to operate in the region.
“At present, there are 20 NBFCs registered with our regional office to operate in Jharkhand. Most importantly, none of these companies are authorised to receive deposits from common citizens and only allowed to give loan and do miscellaneous activities,” said Patric Barla, General Manager (Officer -in-Charge) of RBI’s regional office in Ranchi.
However, Barla admitted that despite the vigilance there were several companies operating in the region under the pretext of various other provisions. “Any NBFC registered in any other State can operate here as well with due permission of local authorities. Another category is of such companies registered with regulators other than the RBI such as SEBI, NHB etc. This apart, there are such players too, which have not been registered anywhere but are operating entirely in an illegal manner,” said the GM.
The central bank on its part has also counted on the measures such as development of a website for SlCC providing easy access to relevant materials on NBFCs for regulators, law enforcement agencies and commoners besides, conducting awareness programme with the help of the State Government’s public relations department against the cheating practices.