Panel for providing insurance cover for NBFC deposits

New Delhi:  In order to check Saradha-type scams, a Parliamentary panel asked government to amend the RBI Act to include deposits collected by NBFCs under the ambit of deposit insurance scheme.  People in remote areas in the absence of banks are forced to “approach the unscrupulous entities, offering high interest rates, only to default in repayment at a later date, for saving their hard earned monies,” the Committee on Estimates said in a report tabled in Parliament.  The Reserve Bank of India (RBI) has admitted that many defaults during 1960s-90s by NBFCs were partly due to lack of regulation.  To protect investors, it suggested that insurance cover may be extended to the deposits of NBFCs either within the Deposit Insurance and Credit Guarantee Corporation framework by amending the relevant legislation or through creation of separate entity as favoured by the RBI for offering deposit insurance.