RBI allows full premature withdrawal of deposits from NBFCs for emergencies but sans interest

The Reserve Bank of India (RBI) has mandated non-banking financial companies (NBFCs) to pay 100 percent of the deposit amount within the first three months of accepting it if the depositor seeks a withdrawal citing an emergency. But the depositor will not get any interest on premature withdrawals, the RBI added.

Issuing the revised regulations governing NBFCs and housing finance companies (HFCs) on Monday, the central bank said the new norms will be applicable from January 1, 2025.

The definition of “critical illness” set by insurance regulator Irdai will be a guide on whether a request qualifies under the category, the central bank added.

“…in cases of critical illness, 100 percent of the amount of the principal sum of deposit may be prematurely paid to individual depositor on request, before the expiry of three months from the date of acceptance of such deposits, without interest,” the central bank said in a notification that has reviewed the regulatory framework for housing finance companies (HFCs) and harmonisation of regulations applicable to HFCs and NBFCs.

It has specified that expenses relating to an emergency include a medical emergency or expenses due to natural calamities or a disaster as notified by the government. If the money is not sought for an emergency and a premature withdrawal is sought within three months, NBFCs can pay up to 50 percent of the deposit without paying any interest. However, not more than 50 percent of the amount of the principal deposit or Rs 5 lakh, whichever is lower, may be prematurely paid, it added.