MK Verma, the RBI’s regional director, speaks in Patna on Thursday. Picture by Ranjeet Kumar Dey

The Reserve Bank of India on Thursday asked the state government to constitute special courts to try cases of fraud and look into irregularities of non-banking financial companies.

“The government is yet to notify constitution of special courts to try cases of fraud and irregularities committed by non-banking financial companies. We raised the issue with the chief secretary during the state-level coordination committee meeting in August. But till date, the government has not notified the courts,” said M.K. Verma, regional director RBI, Patna.

He was speaking to journalists on the need to regulate functioning of the non- banking financial companies in Bihar after a daylong workshop with senior deputy collectors (banking) from all 38 districts.

There are 64 cases of fraud and irregularities of non-banking financial companies in the state, he added.

“Last time, we had even suggested that if it was not possible to constitute special courts in each district, the government could spare a day in a week for any existing court to try the cases. In the normal course, the 64 cases would have the same fate — going through protracted court proceedings for 15-20 years, sending a wrong message to the defaulters,” he said.

Referring to the Bihar Protection of Interest of Depositors Act, 2002, amended in 2013 in the wake of Saradha case in Bengal, Verma said Bihar has made the law more stringent by introducing certain amendments.

“It is impossible to implement the act, meant to protect the interest of the depositors, till the state government takes concrete decisions on notifying the competent authority and special courts,” he said.

“We will again raise the issue of constitution of special courts in the next state-level coordination committee meeting scheduled on December 5 in Patna,” Verma added.

The state-level coordination committee is a coordination forum of all the regulators — Sebi, Insurance Regulatory and Development Authority, ministry of corporate affairs, the National Housing Board, state government and RBI — constituted for the regulation and supervision of the non-banking financial company sector.

The chief secretary is the ex-officio chairman of state-level coordination committee and Verma is the convenor.

The government has notified officers in the rank of additional district magistrate as the “competent authority” to entertain complaints from depositors on fraud or irregularities committed by the non-banking financial companies. The act empowers the officers concerned to carry out search, seizure and enquiry in case of any irregularities related to the companies after obtaining permission from the designated/special courts, but the government has failed to notify the constitution of the special courts.

RBI’s assistant general manager Anand Kumar, who was present at the media interaction, said the state government was in talks with the high court for constitution of the special courts.