Mumbai: Sahara India Financial Corp. Ltd (SFCL), the country’s largest residuary non-banking finance company (RNBC), that has been prohibited from accepting public deposits for violating Indian banking regulator’s norms, presented its case before the Reserve Bank of India (RBI) brass in a marathon four-and-a-half-hour meeting on Thursday. The outcome of the meeting is not known. It is also not known whether there will be more such meetings in the future or whether RBI heard the firm and reserved its order for the time being.
The country’s apex court on 9 June had directed the regulator to hear Sahara India once again before arriving at a final decision on the finance company’s fate.
It is not known whether RBI will stick to its old order after this meeting.
The review with RBI was played out as a victory for Sahara in many media reports although the court clearly mentioned in its order that it was not ruling on the “merits of the case”.
Regulatory trouble: Sahara’s Subrata Roy arrives at the Reserve Bank headquarters in Mumbai on Thursday. (Abhijit Bhatlekar / Mint)
RBI’s spokesperson declined to comment on the outcome of the meeting and Sahara India officials were not available for comment.
The meeting, held at the Indian central bank’s headquarters on Mint Road in Mumbai, was attended by Subrata Roy, managing worker and chairman of Sahara India, and RBI deputy governor V. Leeladhar.
RBI, on 4 June, banned Sahara India from accepting “public deposits from any person in any form whether by way of fresh deposits or renewal of the deposits or otherwise” with immediate effect.
Sahara India got a stay on the RBI order from the Lucknow bench of Allahabad high court the very next day and RBI swiftly moved the Supreme Court to lift the stay.
After hearing both RBI and Sahara India, the Supreme Court said, “It would be appropriate for the...Reserve Bank of India to give an opportunity of hearing” to Sahara, but the court did not find any merit in Sahara India’s argument that RBI had violated the principle of natural justice.
It also said, “Till the matter is disposed off afresh by the Reserve Bank of India,” the banking regulator’s earlier order will not be effective. At the same time, it said, “the interim protection” given by the Allahabad high court shall also not be operative”.
It also made it clear that RBI will take the ultimate decision. “Since the entire matter is being disposed off in this appeal, there is no need for the high court to deal with the writ petition (of Sahara India). We make it clear that we have not expressed any opinion on merits (of the case).”
The RBI council at the apex court said Sahara India had committed “several illegalities” and there is “total lack of transparency” in its functioning.
The company had a deposit liability of close to Rs20,000 crore at the end of 2006-07. It is not a listed entity and its latest financials are not available.
The banking regulator had earlier asked the company to call back all investments in various group firms to comply, in stages, with investment guidelines governing such companies.
Under the law, an RNBC is required to invest all its deposits in government bonds, deposits in other banks and corporate bonds with ratings of “double A+” (AA+) and above.
According to an RBI release on 4 June, Sahara “continuously” violated investment norms; payment of prescribed minimum rate of interest to depositors; asset-liability management guidelines; “know your customers” norms for opening deposits; and failed to intimate depositors while their deposits matured. RBI had first issued a show-cause notice to the company and followed it up with a “personal hearing” and “written submission”.
The banking regulator has directed Sahara India Financial to repay the deposits at an agreed rate of interest as and when they mature.
Sahara India Financial is part of the Sahara group that has interests in businesses such as finance, entertainment, real estate and media, and publishes a Hindi-language paper that competes in some markets with Hindustan, published by HT Media Ltd, which also publishes Mint.
Anita Bhoir contributed to this story.