Non Banking Financial Companies and India’s Rural Economy - with Reference to Sahara Group

Sahara India Group has diversified business in the areas like finance, real estate, media and entertainment, tourism and services. Its business in finance, as usual, comes under the purview of Reserve Bank of India (RBI) jurisdiction. Its two financial institutions (FIs) – Sahara India Investment Corporation Ltd (SIICL), a non-banking finance company (NBFC) and Sahara India Financial Corporation Ltd (SIFCL), a residuary non-banking finance company (RNBC) have been coming under RBI scanner. While the registration of SIICL has been recently cancelled by RBI in spite of a net profit in 2006-07 against a loss in 2005-06, SIFCL has been under the threat of winding up the business owing to regulatory concerns of RBI. Thus time will come when Sahara India Group will no more be there in the financial sector. However, it will not allow the resources withdrawn from these two FIs to be idle. As it has been a prominent player in the real estate industry of India, it is clearly visible that it will reallocate the resources in favour of real estate. That way, the profitability of Sahara India Group will never be undermined. But can we say with confident that the economy will never lose anything by this ‘move by coercion’ of Sahara India Group? Certainly no, because other FIs are yet to penetrate into rural areas what SIICL and SIFCL had been doing successfully. Therefore the twin objective – Mobilization of rural savings and eradication of rural poverty will definitely be in jolt because of this. This paper tries to analyze critically this ‘move by coercion’ of Sahara India Group in the perspective of rural poverty, the ultimate problem of Indian Economy.