MUMBAI (Commodity Online): Long before commercial banks began to promote gold loans in a big way, some finance companies had grown big in this business due to the common man's need to have quick loans despite the huge interest rates they were charged.
Some of these finance companies that sprouted in Kerala went ahead and got listed in the BSE and NSE platforms.
The recent case being that of Manappuram Finance. Firms like Manappuram had Gold lending as its main business but it now emerges that its public deposits collection was a violation of rules governing its licence to function as a lender and the RBI has not only taken notice of the same but has decided to curb such activities.
The RBI ruled out the permission for Manappuram finance to accept/renew deposits from public.
According to RBI in its statement, acceptance of deposits either by Manappuram Finance or by Manappuram Agro Farms is punishable with imprisonment and has cautioned members of public that those who deposit money with Manappuram Finance or MAGRO do so at their own risk.
In 2008, the RBI had banned Subrato Roy's Sahara India Financial Corp. Ltd. from accepting deposits after it came to notice that the company had violated rules including failing to pay minimum interest rates
Many other lending companies are also into chit funds, which many analysts feel, is another scam in the making.
