The Hindu : Front Page : Margadarsi advised not to accept fresh public deposits

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Sunday, Dec 03, 2006
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Margadarsi advised not to accept fresh public deposits

Special Correspondent

Reserve Bank of India asks the HUF to monitor assets

NEW DELHI: The Reserve Bank of India has advised the Hyderabad-based Hindu Undivided Family (HUF), Margadarsi Financiers, not to accept any fresh public deposits or renew matured deposits as it is an unincorporated body. It has also been urged to put in place a mechanism to monitor the assets of the HUF so that they are not eroded, compromising its capacity to discharge obligations to the depositors.

In addition, it has been asked to ensure that deposits are paid as and when they mature as any violation can attract the provisions of the Andhra Pradesh Protection of Depositors of Financial Establishments Act 1999.

This advice followed complaints to the RBI, alleging that the company was engaged in in non-banking financial activities, infringing Sec. 45 S of the RBI Act 1934, which prohibits partnership firms or any unincorporated body of individuals from accepting any deposits from the public unless it is from relatives.

A Finance Ministry release issued here on Thursday says "it was alleged that the Margadarsi Financiers had raised a huge sum of deposits from the public as on March 31, 2005, and had reported accumulated losses.''

The complaints were referred to the RBI, which held talks with the representatives of the unincorporated body. Margadarsi Financiers informed the RBI, it is stated, that it has discontinued accepting deposits, including renewal with effect from September 16.

It also confirmed to the RBI that it was not accepting any fresh deposits or undertaking renewal of maturing deposits and that matured deposits were being paid on schedule.

The HUF agreed to deposit an amount eqivalent to unclaimed deposits in an escrow account on the due date. "The RBI would closely monitor the developments and take appropriate action as and when necessary,'' the release states.

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