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Withdrawal of deposits; Private finance enterprises in a fix in Kerala

Withdrawal of deposits; Private finance enterprises in a fix in Kerala

Following the Popular Finance mishap in Kerala, private finance companies are in deep trouble. The crisis aggravated following the intelligence report submitted by the police that those receiving deposits without sanction from the Reserve Bank of India must be observed.

300 crores have been withdrawn across firms in the last two months. Several firms have stopped providing gold loans. The control imposed on placing gold received as collateral for loans from scheduled banks also adds to the crisis.

Popular finance fell after taking loans of crores of rupees from other banks using the collateral they received. Banks are requesting time from customers who are demanding withdrawal. Several are returning deposits in fear of legal action. Employee wages have borne severe cuts in most enterprises.

Simultaneously, those who withdraw their deposits from private firms are reinvesting them in government enterprises. A majority of the deposits are being made in KSFE or on schemes by the postal department. Consumers have been withdrawing after the notification issued by RBI following the crash of Popular Finance that only 4 enterprises in Kerala are authorized to receive deposits.

Firms which invest deposits in real estate, automobile, textile businesses are the worst hit in the pandemic. Bank officials are demanding that the amount per gram be reduced for gold loans in private enterprises.

Lack of timely debt recovery of gold loans puts these enterprises at a risk. There are also allegations raised against private enterprises regarding registration of higher worth in documents. Following the restrictions imposed by RBI on transactions in cooperative banks, private companies had received deposits of crores by offering higher value for loans.

But following the crash of Popular Front and subsequent notification by RBI, investors have been withdrawing at large, notes the police.

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TAGS:Popular Finance#Cooperative banksKerala Banking Sector
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