"RBI Takes Strict Action Against Financial Institutions, Customers' Money at Risk: Know the Impact"

The Reserve Bank of India (RBI) has taken a hardline stance against both banking and non-banking financial institutions, with strict actions announced against those who have veered away from their core business. As per Section 45-IA (6) of the RBI Banking Regulation Act, 1934, the RBI has cancelled the NBFC registration certificates of 17 non-banking financial institutions and 5 cooperative banks.

The repercussions of this move are likely to be far-reaching, particularly for customers who have invested their hard-earned money in these institutions. For instance, last year, the license of Lakshmi Cooperative Bank was cancelled, leading to widespread unrest among its customers, many of whom are yet to receive their funds. The licenses of four more cooperative banks have since been revoked, with one bank shut down for six months. Additionally, 17 more companies have been issued notices by the RBI.

While the crackdown on non-banking financial institutions has been ongoing for some time now, the latest announcement comes as a surprise to many. The RBI has even compiled a list of 10 non-banking financial institutions that have gone out of business. The list includes companies such as Dhanbad Properties Private Limited, Jayam Beapar Private Limited, Jainix India Limited, Sourya Trade and Investment Limited, JM Holdings Private Limited, Oyide Range Sales Private Limited, Syn Pack Finance Pvt Ltd, Quency Consultancy, BD Trade Enterprises SG Projects, and more.

In fact, three NBFCs have already submitted their registration certificates to the RBI, which means they can no longer withdraw money from the market. What's more, two additional companies have been designated as unregistered core investment companies (CIC) that do not require registration. These are New Age Imports Pvt Ltd and Jubilant Securities Pvt Ltd.

The question on everyone's mind, however, is what will happen to customers' money in these institutions? As per RBI rules, if a customer has money in an authorized financial institution that is subsequently closed down, they can claim up to a maximum of Rs. 5 lakhs. In other words, customers who have invested in these institutions can expect to receive up to Rs. 5 lakhs at the most, regardless of the amount invested.