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Issues: (i) whether the statutory liquidity ratio to be maintained by a non-banking financial company is to be computed on the principal deposits alone or on the aggregate of principal and accrued interest; (ii) whether the interest accrued on the statutory liquidity ratio investments forms part of the statutory liquidity ratio and can be withdrawn for payment to secured creditors.
Issue (i): Whether the statutory liquidity ratio to be maintained by a non-banking financial company is to be computed on the principal deposits alone or on the aggregate of principal and accrued interest.
Analysis: The statutory scheme under Section 45-IB of the Reserve Bank of India Act, 1934 requires continued investment in unencumbered approved securities at a prescribed percentage of deposits outstanding. The expression "deposit" in Section 45-I(bb) is an inclusive definition, and the regulatory forms and directions issued by the Reserve Bank of India show that the obligation is understood in relation to the full liability of the company to depositors. The words "shall invest" and "continue to invest" indicate that the required investment must fluctuate with the total liability, which includes accrued interest.
Conclusion: The statutory liquidity ratio has to be calculated on the aggregate of principal deposits and the interest accrued thereon.
Issue (ii): Whether the interest accrued on the statutory liquidity ratio investments forms part of the statutory liquidity ratio and can be withdrawn for payment to secured creditors.
Analysis: The approved securities are to be maintained for the benefit of depositors, and the Reserve Bank's 1998 Directions require the securities and their market value to remain intact unless permitted otherwise. The market value of a deposit or fixed deposit includes accrued interest, and the statutory and regulatory framework gives the Reserve Bank discretion to condone non-compliance, grant exemption, or permit substitution or withdrawal in appropriate cases. On the facts, the company was under court-monitored administration, the proposed use of the interest would substantially reduce secured debts, and that would ultimately benefit the depositor body by freeing assets from encumbrance.
Conclusion: The interest accrued on the statutory liquidity ratio forms part of the protected reserve, but the Reserve Bank ought to permit its release in the present facts for payment under the one-time settlement proposals.
Final Conclusion: The writ petition was allowed, and the petitioner was permitted to pursue the one-time settlement route by obtaining acceptance letters from creditor banks and securing the respondent's permission to withdraw only the interest accumulated on the statutory liquidity ratio for direct payment to those banks within the stated limit.
Ratio Decidendi: For a non-banking financial company, the statutory liquidity ratio is computed on the total depositor liability including accrued interest, and the Reserve Bank's regulatory power may be exercised to permit release of interest accrued on statutory liquidity ratio investments where court-supervised liquidation or settlement will better protect depositor interests.
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