RBI unearths irregularities in Fidelity Finance

Kavitha Venkatraman

Chennai, Sept 17: The Reserve Bank of India (RBI) has reportedly found gross irregularities in the accounts of the Chennai-based Fidelity Finance, a non-banking finance company (NBFC) promoted by the TVS group.

RBI, which launched an inquiry into the NBFC recently following complaints from the depositors regarding non-payment of matured deposits, has found the company violating many prudential norms, such as not keeping the statutory liquidity ratio (SLR) limits. The RBI investigating team is expected to submit its report to the central office within the next couple of days.

If the report is accepted, RBI is likely to issue show cause notice seeking explanation from the company directors. Besides, it may also take punitive actions such as to revoke the ‘Certificate of Registration’ if the company fails to respond within 10-15 days to its notice.

Company officials could not be reached for their comments despite repeated attempts.

Sources privy to the investigation told The Financial Express that the RBI started investigating the records of Fidelity Finance following complaints of non-repayment of matured deposits from several depositors. “The Company Law Board (CLB) has been receiving several complaints against Fidelity Finance and has been issuing individual orders directing the company to repay the deposits within a period of two to three months”, they said.

However, despite umpteen directions, the company did not comply with the CLB orders and continued to accept fresh deposits and renew existing ones, they added. “This is in clear violation of NBFC rules”, sources pointed out. Fidelity Finance, according to sources, has not repaid matured deposits to the tune of Rs 10 crore involving 6,000 depositors.

They also pointed out that Fidelity Finance has been reporting losses since 1996 and the accumulated losses of the company as on March 2001 was about Rs 7 crore.