MUMBAI â€" India’s central bank told Sahara India Financial Corp., a massive savings-plan company, to put independent directors on its board and stop taking new deposits that mature beyond June 2011. In an order that was a partial reprieve for the founder of Sahara, Subrata Roy, the Reserve Bank of India backed off an order issued earlier this month that Sahara stop taking deposits altogether. It changed its judgment after discussions with Sahara ordered by India’s top court. In the past 30 years, Mr. Roy has built a $10 billion empire spanning finance to real estate to media, powered by the savings of mostly poor and rural savers. His savings plans require regular deposits of as little as two cents a day for from two to seven years and have attracted 42 million savers with $4.3 billion in savings to his flagship company, unlisted Sahara India Financial. In its reversal, the Reserve Bank said late Tuesday that Sahara will be allowed to accept new deposits that mature before June 30, 2011. Sahara will have to finish paying all interest and principal on current deposits by June 30, 2015. In the next 30 days Sahara will choose independent directors for half of the seats on its board. Those directors have to be â€acceptable to the Reserve Bank of India,†it said. The Reserve Bank also ordered Sahara to trim liabilities. Its total liability to depositors of around 180 billion rupees, or $4.2 billion, needs to be cut to 150 billion rupees by July 2009, then to 126 billion rupees by June 30, 2010, and 90 billion rupees by June 30, 2011. The Reserve Bank initially said this month it wanted Sahara to stop accepting deposits right away because it had been breaking central-bank rules and guidelines. It also said Sahara wasn’t investing enough in low-risk bonds; didn’t have basic information of more than 70% of its customers; and was using penalties to slash interest rates on deposits to as low as 1%. After discussions over the past two weeks, the central bank said that if Sahara is willing to wind down operations and accept independent directors, it is â€satisfied that to protect the interest of depositors and in the public interest†Sahara can continue accepting deposits. A Sahara spokesman said: â€We always respect natural justice, we will go by the true spirit of the order.†Ordering Sahara to stop taking deposits in 2011 will effectively halt its main business. Sahara officials said the group would continue to thrive as it is moving into other profitable businesses including insurance and real estate.
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