Mumbai, June 4: The Reserve Bank of India (RBI) has prohibited Sahara India Financial Corporation Ltd (SIFCL) from accepting public deposits or renewing them with immediate effect.

The RBI said that it had taken this action as the company continuously violated its directions on various fronts. These include maintenance of directed investments, payment of a minimum rate of interest and following asset-liability guidelines. It also violated know-your-customer norms.

Initially, the RBI had issued a showcause notice to SIFCL. In response to the notice, the company sought a personal hearing, which was granted.

SIFCL also requested for an extension of time for giving its written submissions, which was granted.

“The submissions received were carefully examined. The RBI has come to the conclusion that SIFCL had continuously violated directions/guidelines,” the central bank said in a statement.

It prohibited SIFCL with immediate effect from accepting any deposit in whatsoever manner, including instalments under any running daily deposit or other recurring deposit schemes or otherwise, either from its existing depositors or new depositors whether by way of renewal or otherwise.

Besides, Sahara has been directed to repay the deposits as and when they mature. The company has also been told that it shall not treat the non-payment of instalments under any running daily deposit or other recurring deposit schemes by depositors after the date of the RBI order as a default by a depositor.

Terming the Reserve Bank's order on banning the acceptance of deposits by it as “unsound and arbitrary”, SIFCL today pinned hopes on a legal remedy. Reacting to the banking regulator's decision, the company said the Order was passed in a “most vindictive and arbitrary manner” and did not conform to the RBI acts.