Supreme Court Upholds RBI Remit Over NBFCs; State Moneylending Laws Won’t Apply

Supreme Court

Non-banking financial companies (NBFCs) will be regulated by the Reserve Bank of India (RBI) as the RBI Act takes a holistic approach to the business of banking, money-lending and operation of the currency & credit system of India.

In Supreme Court on Tuesday stated that the state enactments regulating the business of moneylending would have no application on NBFCs registered with the RBI as it has a one-eyed focus to protect borrowers.

According to the apex court, no NBFC can start or carry on business without obtaining a certificate of registration under the RBI Act.  Also, they can continue the business only if it is in compliance with the RBI Act and circulars/directions issued by the RBI.

Also Read | Banks Begin to Raise Lending, Deposit Rates after RBI Rate Hike

“The RBI has the power to supersede the Board of Directors of a NBFC. It can also to wind up an NBFC,” the court said.

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