Mumbai: In an announcement made public on Monday, the RBI confirmed the cancellation of registration for 35 NBFCs. This significant move impacts firms across the country, but notably, 19 of the affected non-bank lenders are based out of Mumbai. Prominent names among those mentioned include Elegant Capital, Pal Credit & Capital, and Dhuleva Finance.
The cancellation of a CoR is a crucial step that legally prevents the entities from continuing the core business functions of an NBFC, as defined under Section 45-I of the RBI Act, 1934. The full list of deregistered entities, which also includes Pankaj Services Limited, Balbros Leasing and Investments, and APAC Housing Finance, reflects the wide-ranging nature of the central bank’s enforcement.
Two Paths to Deregistration
The 35 cancellations resulted from two distinct regulatory pathways. The first involved a set of 14 institutions—13 NBFCs and one housing finance company—that voluntarily surrendered their CoR to the regulator. In these cases, the RBI exercised its regulatory power to formally cancel the registrations following the surrender.
The second, and larger, set of cancellations involved a subsequent notification by the RBI announcing the straight cancellation of the CoR for the remaining 21 NBFCs. These revocations were ordered by the regulator as direct sanctions throughout the month of September.
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Reasons for Voluntary Surrender
The central bank specified three main reasons for the voluntary surrenders across the initial 14 firms:
- Exit from NBFI Business (6 firms): Companies like Pankaj Services and Balbros Leasing & Investments chose to exit the non-banking financial institution business entirely.
- Meeting CIC Criteria (1 firm): Mumbai-based Bachhraj & Company was found to meet the criteria prescribed for an unregistered Core Investment Company (CIC), leading to its change in status.
- Cessation of Legal Entity (7 firms): Several firms, including Manoj Mercantile and APAC Housing Finance, ceased to be legal entities due to actions such as amalgamation, merger, dissolution, or a voluntary strike-off.
Consequence for the Financial Sector
This large-scale deregistration sends a clear message about the RBI’s zero-tolerance policy toward non-compliant or non-operational NBFCs. The NBFC sector plays a critical role in supplementing the traditional banking system by providing credit to underserved segments. By removing inactive or non-conforming entities, the RBI aims to clean up the sector, ensuring that only robust and compliant firms continue to operate, thereby safeguarding the stability of India’s financial system.
