1. The Reserve Bank of India has asked non-banking finance companies (NBFCs) to desist from contributing capital to any partnership firm or be a partner in partnership firms.
2. In the case of existing partnerships, NBFCs should seek early retirement from the partnership firms, the central bank said in a notification to all NBFCs.
3. This directive comes in the backdrop of the RBI coming across some NBFCs having large investments in, or contributed capital to, partnership firms.
4. Industry experts are divided in their opinion on the RBI action.
5. While one segment feels that the blanket ban is unwarranted and should have been restricted to only deposit-taking NBFCs, the other segment is of the view that the move is justified as an NBFC's funds could be at stake if a partner surreptitiously withdraws from a partnership firm.
6. NBFCs, especially non-deposit taking, contribute capital to or invest in a partnership firm, which is in the business of investments, to get higher returns, say experts.