Rating of NBFCs is necessary before it accepts deposit

An unrat­ed NBFC, except cer­tain Asset Finance com­pa­nies (AFC), can­not accept pub­lic deposits. An excep­tion is made in case of unrat­ed AFC com­pa­nies with CRAR of 15% which can accept pub­lic deposit with­out hav­ing a cred­it rat­ing up to a cer­tain ceil­ing depend­ing upon its Net Owned Funds. NBFC may get itself rat­ed by any of the five rat­ing agen­cies name­ly, CRISIL, CARE, ICRA and FITCH, Rat­ings India Pvt. Ltd and Brick­work Rat­ings India Pvt. Ltd

The sym­bols of min­i­mum invest­ment grade rat­ing of the Cred­it rat­ing agen­cies are:

Name of rat­ing agencies	Nomen­cla­ture of min­i­mum investment grade cred­it rat­ing (MIGR)
CRISIL	FA- (FA MINUS)
ICRA	MA- (MA MINUS)
CARE	CARE BBB (FD)
FITCH Rat­ings India Pvt. Ltd.	tA-(ind)(FD)
Brick­work Rat­ings India Pvt. Ltd.	BWR FBBB
SMERA	SMERA A

It may be added that A- is not equiv­a­lent to A, AA- is not equiv­a­lent to AA and AAA- is not equiv­a­lent to AAA.

If rat­ing of an NBFC is down­grad­ed to below min­i­mum invest­ment grade rat­ing, it has to stop accept­ing pub­lic deposits, report the posi­tion with­in fif­teen work­ing days to the RBI and bring with­in three years from the date of such down­grad­ing of cred­it rat­ing, the amount of pub­lic deposit to nil or to the appro­pri­ate extent per­mis­si­ble under para­graph 4(4) of Non-Bank­ing Finan­cial Com­pa­nies Accep­tance of Pub­lic Deposits (Reserve Bank) Direc­tions, 1998.

Course of action when NBFC defaults in repay­ment of deposit 

If an NBFC defaults in repay­ment of deposit, the depos­i­tor can approach Com­pa­ny Law Board or Con­sumer Forum or file a civ­il suit in a court of law to recov­er the deposits.