RBI Cancels Certificate of Registration of Four NBFCs: What Section 45-IA(6) Means — and the Wider Powers of RBI

The Reserve Bank of India (RBI) recently cancelled the Certificate of Registration (CoR) of four Non-Banking Financial Companies (NBFCs). While CoR cancellations are not routine, they are a powerful supervisory tool used when an NBFC fails to comply with prudential, regulatory, or governance requirements.

This development has again placed the spotlight on Section 45-IA(6) of the Reserve Bank of India Act, 1934, the statutory basis for cancellation of an NBFC’s CoR.

What Does Section 45-IA(6) of the RBI Act Provide?

Section 45-IA deals with registration requirements for NBFCs. Sub-section (6) empowers RBI to cancel an NBFC’s CoR if it fails to comply with essential conditions.

RBI may cancel the CoR if the NBFC:

  • Fails to comply with conditions of registration;

  • Does not maintain the prescribed Net Owned Fund (NOF);

  • Fails to submit statutory returns or documents;

  • Operates in a manner that is prejudicial to public interest;

  • Violates RBI directions, circulars, or notifications;

  • Ceases to carry on business.

Before cancellation, RBI generally provides an opportunity of being heard, except where urgent action is required.

Why Does RBI Cancel an NBFC’s CoR?

1. Persistent Non-Compliance: Non-maintenance of NOF, repeated non-submission of returns, or violation of prudential norms.

2. Governance or Operational Concerns: Poor internal controls, unsuitable directors, opaque ownership, AML lapses, aggressive recovery practices.

3. Public Interest and Customer Harm: Unfair lending, predatory pricing, systemic risks, or conduct that undermines confidence.

4. Dormancy: The NBFC is registered but not conducting NBFC business.

Other Powers of RBI Over NBFCs:

RBI has extensive powers under the RBI Act, 1934 and its directions, including:

1. Power to Issue Directions: Covering prudential norms, fair practices, governance, digital lending, recovery, outsourcing.

2. Power to Inspect (Section 45N): On-site and off-site inspection; mandatory access to books and records.

3. Power to Call for Information (Sections 45B, 45J): Any return, statement, document, or clarification.

4. Power to Penalise (Sections 58B & 58G): Including monetary penalties, enforcement actions, and prosecution.

5. Power to File Winding-Up Petitions (Section 45MC): For insolvency, public interest concerns, or repeated violations.

6. Powers Over Deposit-Taking NBFCs: Interest caps, deposit acceptance conditions, repayment obligations, and ALM oversight.

What NBFCs Should Do Now:

  • Maintain strong governance & documentation;

  • Monitor NOF compliance;

  • Ensure timely filing of all RBI returns (SBR, NBS, CIC reporting, etc.);

  • Implement transparent pricing & customer communication;

  • Strengthen risk controls and supervisory alignment.



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