In the largest repayment offer of its kind, Sahara India Financial Corp (SIFCL), the parabanking arm of Sahara India Pariwar, has committed to repay all its 19 million-plus depositors by December this year.
The move comes a full four years before the deadline set by the Reserve Bank of India (RBI) for the winding up and two months after the Securities and Exchange Board of India (Sebi) asked two other companies raising money through debentures to refund at least Rs 6,588 crore (Rs 65.88 billion) to investors.
An appeal against the Sebi order is expected to be heard by the Securities Appellate Tribunal (SAT) beginning Monday.
"The company has decided to prepay the entire liability by December 2011 itself. Subsequent to this prepayment, the company will have no liability (sic) of a single paisa," said SIFCL in a public notice. The notice, published through advertisements, said the company had accepted Rs 73,000 crore (Rs 730 billion) till June 2011.
The amount to be actually paid over the next few months will be much lower. According to a filing, the entity classified as a Residual Non Banking Company (RNBC) by the Reserve Bank, said it had received deposits of Rs 59,076 crore (Rs 590.76) till June 2008. It had repaid maturities of Rs 41,563 crore (Rs 415.63), leaving it with a aggregate liability to depositors (ALD) of Rs 17,513 crore (Rs 175.13 billion).
In 2008, the RBI had directed SIFCL to wind down its operations by 2015. The RBI order further said the ALD should be brought down gradually to Rs 15,000 crore (Rs 150 billion) by June 2009, Rs 12,600 crore (Rs 126 billion) by June 2010 and Rs 9,000 crore (Rs 90 billion) by June 2011. An RBI spokesperson said there had been no further orders in this matter.
In an earlier advertisement in September 2009, liabilities under the head deposits had come down to Rs 15,688 crore as of the March 2009
Assuming it had followed the timeline given by the RBI, SIFCL would have to pay out less than Rs 9,000 crore to bring down the liability to zero.
Agents said as most of the payments in SIFCL's flagship daily deposit scheme had already happened, they had to refund three-year and five-year deposits. "Liabilities under this will be much lower," said an agent from Jharkhand.
Sahara officials said the repayment was expected to start in a month's time. The massive refund operation is expected to be done through 1,508 service centres the company has across the country.
In 2008, the RNBC had 39.4 million deposit accounts, double the number of demat accounts in the country, serviced by an army of 685,000 agents. After the RBI order, the number came down to 19.16 million accounts by February 2011.
Subsequent numbers are not available. It is also not clear what the terms of prepayment are and how the funds will be sourced for this massive refund.
The September 2009 advertisement gave some clues on the terms of prepayment.
"The company at its sole discretion or on the request of depositor as per the terms of contract, as the case may be, repays a deposit after 12 months from date of its acceptance but before maturity, shall pay interest up to 2 per cent lower than the interest applicable to a deposit or in absence of a specified rate for the period, up to 3 per cent lower than the minimum rate at which deposits are accepted by the RNBC," the advertisement said.
Sahara Minor, the flagship daily deposit scheme, accepted deposits at 3.5 per cent per annum for a tenure of 12 to 21 months.
A detailed questionnaire sent to a Sahara spokesperson asking about the prepayment procedure, terms, source of funds and timing of the announcement remained unanswered.
A communications official engaged by the company said, "The mail has been forwarded to the top boss, who is abroad."
