New RBI rules for premature FD withdrawal, nominations with NBFCs effective January 1, 2025

Accordingly, based on a review of the extant regulations applicable to HFCs prescribed vide Master Direction – Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021, it has been decided to issue revised regulations as detailed in the Part A of Annex. As part of the exercise, certain regulations applicable to NBFCs have also been reviewed and revised regulations are detailed in Part B of Annex. The revised regulations shall be applicable with effect from January 1, 2025,” stated the RBI circular.

Here is a look at the revised RBI guidelines regarding the acceptance of public deposits for NBFCs.

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According to the RBI notification, “NBFCs are required to acknowledge in writing to the depositor/s the filling of the relevant duly completed form of nomination, cancellation and/or variation of the nomination. It is now advised that NBFCs shall devise a proper system of acknowledging the receipt of duly completed form of nomination, cancellation and/or variation of the nomination. Such acknowledgement shall be given to all the customers irrespective of whether the same is demanded by the customers.”

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“Further, NBFCs shall introduce the practice of recording on the face of the passbooks/ receipts the position regarding availment of nomination facility with the legend “Nomination Registered” and they shall also indicate the name of the Nominee in the passbook/ receipt, in case the customer is agreeable to the same.”

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Tiny deposits may prematurely be paid to individual depositors, at the request of the depositor, before the expiry of three months from the date of acceptance of such deposits, in entirety, without interest;
According to the RBI circular, ” In case of other public deposits, not more than fifty per cent of the amount of the principal sum of deposit or Rs 5 lakh, whichever is lower, may be prematurely paid to individual depositors, at the request of the depositors, before the expiry of three months from the date of acceptance of such deposits, without interest; the remaining amount with interest at the contracted rate shall be governed by the provisions of the extant directions as applicable for public deposits.”

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Incase of critical illness 100% of the amount of the principal sum of deposit, will be prematurely paid to individual depositors, at the request of the depositors, before the expiry of three months from the date of acceptance of such deposits, without interest.

Note that the amount as per these provisions will also apply to the existing deposit contracts wherein the individual depositor does not have a right to premature withdrawal of the deposit before the expiry of three months.

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Earlier, NBFCs must notify depositors about the deposit’s maturity date at least two months in advance. It has been decided to shorten the term from two months to fourteen days. As a result, the NBFC must notify the depositor of the deposit’s maturity date at least 14 days in advance.

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