RBI Imposes Rs 2.5 Cr Fine On L&T Finance For Non-Compliance
The Reserve Bank of India (RBI) has taken regulatory action against L&T Finance by imposing a monetary penalty of Rs 2.50 crore (Rupees Two crore Fifty lakh only) on the company. This action was taken due to non-compliance with specific provisions of the Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016. The penalty has been levied by the RBI under the relevant sections of the Reserve Bank of India Act, 1934.
It's important to note that this regulatory action is focused on addressing deficiencies in compliance and should not be construed as a judgment on the validity of any transactions or agreements between the company and its customers. The RBI's decision came after a statutory inspection of L&T Finance, which covered its financial position as of 31 March 2021 and 31 March 2022.
This inspection included an examination of various reports and correspondence. During the inspection, several issues were identified, including the company's failure to inform its retail borrowers about the risk gradation and the rationale behind different interest rates applied to different borrower categories in loan application forms or sanction letters.
Additionally, the company did not notify borrowers of changes in penal interest rates when rates were higher than initially communicated. It also failed to provide notice of changes in loan terms and conditions when charging an annualised interest rate higher than what was communicated at the time of sanction.
Subsequently, the RBI issued a notice to L&T Finance, requesting the company to provide reasons why a penalty should not be imposed for non-compliance with the RBI directions.
After evaluating the company's response to the notice and additional submissions, along with oral statements made during a personal hearing, the RBI determined that there was a substantiated charge of non-compliance with the RBI directions. Therefore, the imposition of a monetary penalty was deemed appropriate to address this non-compliance.
