RBI Imposes Rs. 2.5 Crore Penalty on L&T Finance Limited for Regulatory Non-Compliance
The Reserve Bank of India (RBI) has imposed a fine of Rs2.50 crore (Rupees Two Crore Fifty Lakh) on L&T Finance Limited for regulatory non-compliance. According to an RBI press release, the Non-Banking Financial Company (NBFC) failed to adhere to specific provisions that are systematically significant for an NBFC and Deposit-taking Company, as per the RBI Directions 2016.
The penalty has been levied under the relevant sections of the Reserve Bank of India Act, 1934. This regulatory action is taken in response to compliance failures and should not be interpreted as a judgment on the legitimacy of any transactions or agreements between the company and its customers, the report stated.
The Central bank”s action follows a statutory inspection of L&T Finance Limited conducted between March 31, 2021, and March 31, 2022. The RBI accused the NBFC of neglecting its duty to inform retail borrowers about risk gradation and the rationale behind different interest rates applied to various borrower categories in loan application forms or sanction letters. This was one of several issues identified during the examination, which included a review of various reports and correspondence.
Furthermore, the company failed to inform borrowers about changes in penal interest rates when rates were increased. It also did not communicate the loan terms and conditions despite imposing a higher annual interest rate than initially communicated. After L&T Finance Limited failed to comply with the RBI”s directions, the RBI issued a notice to the company requesting an explanation for the non-compliance.
The company responded to the notice and submitted additional information, which the RBI evaluated. The RBI also considered oral statements made during a personal hearing. Based on this evaluation, the RBI found a substantiated charge of non-compliance with its directions. Consequently, the RBI deemed it appropriate to impose a monetary penalty to address this non-compliance.
