RBI says depositors can seek premature withdrawal of deposits opened with NBFCs: All you need to know

Have you ever wondered what you would do if you had a fixed deposit with an NBFC but wanted to prematurely withdraw it due to an emergency? Well, the latest guidelines issued by the Reserve Bank of India (RBI) make provision for this.

The banking regulator released a regulatory framework via a circular dated August 12 relating to HFCs (Housing finance companies) and NBFCs (Non-banking Finance Companies).

A number of regulations applicable to NBFCs were reviewed and revised regulations were shared in the central bank's latest circular.

These regulations list the guidelines regarding the acceptance of public deposits. They also state that NBFCs are meant to repay deposits to enable depositors to meet certain emergent expenses.

Depositors to seek premature withdrawal in such cases:

I. Tiny deposits: When the deposits are tiny (i.e., deposits not exceeding ₹10,000 in value), they can be paid prematurely to depositors when the depositor makes a request before the expiry of three months from the date of acceptance of such deposits, in entirety, without interest.

II. Other deposits: In the case of other public deposits, not more than 50 per cent of the principal sum of the deposit or ₹5 lakh, whichever is lower, may be prematurely paid to individual depositors, at the depositors' request, before the expiry of three months from the date of acceptance of such deposits, without interest.

The remaining amount with interest at the contracted rate will be governed by the provisions of the extant directions as applicable to public deposits.

III. Critical illness: In cases of critical illness, 100 per cent of the principal sum of the deposit may be prematurely paid to individual depositors at the depositors' request, before the expiry of three months from the date of acceptance of such deposits, without interest.

IV. Calamity: Expenses of an emergent nature also include medical emergency or expenses occurring on account of natural calamities/ disaster as notified by the government.

V. Existing contracts: The amount as per these provisions will also apply to the existing deposit contracts wherein the depositor does not have a right to premature withdrawal of the deposit before the expiry of three months.

Intimate the maturity details

Until now, NBFCs were supposed to inform the depositor of the maturity details at least two months before the maturity date. The RBI’s latest directions state that this period should be reduced from two months to 14 days.

Accordingly, the circular states that the NBFC will have the duty to inform the depositor of the maturity details at least two weeks before the maturity date.