Sections 45-N and 45-NA: RBI Inspection Powers and Unauthorised Solicitation of Deposits
Sections 45-N and 45-NA of the Reserve Bank of India Act, 1934 govern the inspection of non-banking institutions by the Reserve Bank of India (RBI) and restrict solicitation of public deposits on behalf of such institutions by persons who lack written authorisation or fail to comply with applicable advertisement requirements.
Section 45-N - Inspection
The following reproduces the substantive statutory provisions contained in Section 45-N.
(1) The Bank may, at any time, cause an inspection to be made by one or more of its officers or employees or other persons (hereafter in this section referred to as the inspecting authority)-
(i) of any non-banking institution, including a financial institution, for the purposes of verifying the correctness or completeness of any statement, information or particulars furnished to the Bank or for the purpose of obtaining any information or particulars which the non-banking institution has failed to furnish on being called upon to do so; or
(ii) of any non-banking institution being a financial institution, if the Bank considers it necessary or expedient to inspect that institution.
(2) It shall be the duty of every director or member of any Committee or other body for the time being vested with the management of the affairs of the non-banking institution or other officer or employee thereof to produce to the inspecting authority all such books, accounts and other documents in his custody or power and to furnish that authority with any statements and information relating to the business of the institution as that authority may require of him, within such time as may be specified by that authority.
(3) The inspecting authority may examine on oath any director or member of any Committee or body for the time being vested with the management of the affairs of the non-banking institution or other officer or employee thereof, in relation to its business and may administer an oath accordingly.
Scope and purpose of inspection
Verification of returns: Under Section 45-N(1)(i), RBI can inspect a non-banking institution to check the accuracy and completeness of statements already furnished, or to obtain information that the institution has failed to provide despite being asked.
Inspection of financial institutions: Section 45-N(1)(ii) additionally authorises inspection of a non-banking institution that is a financial institution when RBI considers inspection necessary or expedient. These are alternative statutory grounds; the power is not confined to cases of an established contravention.
Production of records: Section 45-N(2) places a duty on the institution's management, officers and employees to produce relevant books, accounts and documents in their custody or power and provide requested information within the time fixed by the inspecting authority.
Examination on oath: Section 45-N(3) permits the inspecting authority to question specified responsible persons under oath in relation to the institution's business. Institutions should maintain reliable records and ensure cooperation with lawful inspection requirements.
Section 45-NA - Deposits not to be solicited by unauthorised persons
Section 45-NA regulates persons who solicit deposits of money from the public on behalf of non-banking institutions, whether through a prospectus, advertisement or any other method.
No person shall solicit on behalf of any non-banking institution either by publishing or causing to be published any prospectus or advertisement or in any other manner deposits of money from the public unless-
(a) he has been authorised in writing by the said non-banking institution to do so and specifies the name of the institution which has so authorised him, and
(b) the prospectus or advertisement complies with any order made by the Bank under section 45J and with any other provision of law for the time being in force, applicable to the publication of such prospectus or advertisement.
Meaning and legal effect of Section 45-NA
Written authorisation: A person soliciting public deposits for an institution must hold written authorisation from that institution and identify it. An oral arrangement or mere association with the institution does not satisfy the express written-authorisation requirement.
Advertisement compliance: Where solicitation uses a prospectus or advertisement, the material must comply with RBI orders under Section 45-J and other laws governing its publication. Written authorisation alone does not legalise an otherwise prohibited deposit invitation.
Separate issue of permission to accept deposits: Section 45-NA does not itself authorise a non-banking institution to accept public deposits. Whether it may do so depends on its legal status, RBI registration and the relevant deposit-acceptance framework.
Relevant statutory definitions and connected provisions
Non-banking institution: The definition in Section 45-I(e) applies to Chapter IIIB. It should be distinguished from the statutory definitions of a financial institution and a non-banking financial company.
Deposit: Section 45-I(bb) defines deposits broadly, subject to its specified exclusions. The character of a receipt must be assessed against the full definition and applicable RBI directions.
Information and directions: Section 45-K concerns information and directions about deposits; Section 45-L concerns information and directions relating to financial institutions. Inspection under Section 45-N can help verify regulatory information furnished under Chapter IIIB.
Practical compliance checklist
Non-banking institutions should keep accurate and accessible business and deposit records, identify staff responsible for responding to RBI inspections, and verify that persons inviting deposits on their behalf hold current written authorisation. Public-facing deposit material should be checked against applicable RBI orders, directions and statutory restrictions before publication.
Official statutory and regulatory sources
Consult India Code for the RBI Act, Reserve Bank of India for applicable directions and regulatory circulars, and the Gazette of India for statutory notifications and amendments. Regulatory requirements may differ by the category and status of the institution.