CALCUTTA, Dec 23: The Reserve Bank of India (RBI) has labelled Helios Investment & Finance Co Ltd as "poorly managed" and its financial position "unsatisfactory" in its recent inspection report. A special inspection of the Patna-based non-banking finance company (NBFC) was undertaken in October this year. RBI wanted to check the extent of its directives' violations detected during past inspections. Apart from violations on at least nine counts, the company has also been late in the submission of annual returns for 1996 and the audited balance sheet for the same year. The violations, says the report, are "wilful".

While the company has been classified "provisionally as loan company", the RBI inspecting official found its deposit-acceptance activities are akin to residuary non-banking company or chit-fund as they are otherwise known.

In July this year, the RBI had clamped down on Helios "based on the findings of the inspection conducted with reference to its financial position as on 31st March 1995...". The prohibitory order contained the following conditions: not to accept fresh deposits or renew maturing deposits and not to alienate the assets even for the payment of matured deposits.

Subsequently in August 1997, these conditions were relaxed to the extent the company was allowed to operate bank accounts for the repayment of deposits and meeting genuine and reasonable office expenditure. It was also told to furnish cashflow statements along with the auditors' report on a monthly basis.

However, according to the apex bank, the company has not submitted the cashflow statement for October and November 1997 as stipulated in the letter relaxing the conditions. It has also admitted its inability to verify whether the company was accepting any deposits after the issue of the prohibitory order as the books of accounts were not updated. The report says the company's liquidation of fixed deposit receipts and US-64 units have been done without RBI's prior approval.

During the October inspection, the apex bank took a closer look at the company's compliance with the prohibitory order issued in July and the subsequent relaxation of the conditions. With regard to the non-acceptance of deposits, the RBI found the functioning of its branches had come to a standstill, and as a result, the reporting system had collapsed "leading to non-updation of the books of accounts". The company's branches maintain the deposit registers relating to the daily deposit scheme, while the head office maintains only the registers for fixed deposits.

The company's records did not show any entries after July 14, 1997, the date on which the prohibitory order was issued. In fact, its auditors had certified the company had stopped accepting deposits after the issuance of the prohibitory order. Regarding the restriction on alienation of assets, the RBI found the company had taken advantage of the approval to operate bank accounts for payment of deposits and liquidated its investments in fixed deposits for around Rs 6 crore and in US-64 to the extent of Rs 49 lakh.

The cashflow statement submitted by the company for the period August 16 to September 30, 1997 shows the company has generated an amount of more than Rs 12 crore to meet its deposit liabilities of around Rs 11 crore, while its office expenses are to the tune of Rs 1.4 crore. It had also appropriated the receipts from a group concern Helios Plantations & Developers Ltd (HPDL) in connection wih the sale of land and plantation.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.