RBI warns about high return investments

Written by ENS Economic Bureau | Mumbai | Updated: Jun 3 2013, 14:01pm hrs
RBIMaximum interest rate that an NBFC can pay to a depositor should not exceed 12.5%, says RBI. (Reuters)
The Reserve Bank of India has warned retail investors against investing in instruments and schemes of companies including deposits with non-banking finance companies (NBFCs) that offer high interest rates.

Investors must generally be circumspect if the interest rates or rates of return on investments offered are high. Unless the entity accepting funds is able to earn more than what it promises, the entity will not be able to repay the investor as promised, the RBI said in an advisory to investors.

Before investing in schemes that promise high rates of return investors must ensure that the entity offering such returns is registered with one of the financial sector regulators and is authorised to accept funds, whether in the form of deposits or otherwise, it said while releasing the dos and donts for investors against the backdrop of several unauthorised companies mobilising funds from the public.

According to the RBI, the maximum interest rate that an NBFC can pay to a depositor should not exceed 12.5 per cent. The central bank alters the interest rates from time to time taking into account the prevailing macroeconomic environment.

The RBI also advised public to immediately register their complaints in case they notice any company accepting deposits unauthorisedly or not repaying the principal and/or interest with the local police or with the economic offences wing of the state police and in case the entity is a company, to register their complaints with the Registrar of Companies.