The Reserve Bank of India (RBI) has taken official action against it L&T Finance Limited by imposing a fine of ₹2.50 crore (Rupees two crore fifty lakh only) on the company.
According to an RBI press release, 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 RBI levied the penalty under relevant sections of the Reserve Bank of India Act, 1934.
It is important to note that this regulatory action is focused on addressing compliance deficiencies and should not be construed as an assessment of 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 covering its financial position as on March 31, 2021.
The inspection found several issues, including the company’s failure to inform its retail borrowers about risk grading and the reasons for different interest rates for different categories of borrowers in loan application forms or sanction letters.
It also failed to communicate changes in loan terms when charging an annual interest rate higher than that communicated at the time of the sanction.
Subsequently, the RBI issued a notice to L&T Finance Limited asking the company to explain why no penalty should be imposed for non-compliance with the RBI directions.
After evaluating the company’s response to the notice and additional submissions as well as oral statements made during a personal hearing, the RBI concluded that there was a reasonable allegation of non-compliance with the RBI instructions.
Therefore, the imposition of a fine was considered appropriate to address this non-compliance.