RBI penalizes L&T Finance with Rs 2.5 crore fine for non-compliance
Oct 21, 2023
Mumbai (Maharashtra) [India], October 21 : The Reserve Bank of India (RBI) has taken regulatory action against L&T Finance Limited by imposing a monetary penalty of Rs 2.50 crore (Rupees Two crore Fifty lakh only) on the company.
According to a press release issued by RBI, this action follows 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 Limited, which covered its financial position as of March 31, 2021, and March 31, 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 annualized interest rate higher than what was communicated at the time of sanction.
Subsequently, the RBI issued a notice to L&T Finance Limited, 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.
