These actions are based on deficiencies in regulatory compliance
FinTech BizNews Service
Mumbai, April 5, 2024: The Reserve Bank of India (RBI) has, by separate orders in March, 2024, imposed a monetary penalty on a bank and an NBFC (HFC). These actions on these entities are based on deficiencies in regulatory compliance, as per the press releases issued by the RBI on 5th April, 2024.
RBI has imposed monetary penalty on LIC Housing Finance and IDFC First Bank.
1 The Reserve Bank of India (RBI) has, by an order dated March 27, 2024, imposed a monetary penalty of Rs49,70,000/- (Rupees Forty-Nine Lakh Seventy Thousand only) on LIC Housing Finance Limited (the company) for non-compliance with certain provisions of the ‘Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021’ issued by RBI. This penalty has been imposed in exercise of powers vested in RBI conferred under section 52A of the National Housing Bank Act, 1987.
The statutory inspection of the company was conducted by the National Housing Bank with reference to its financial position as on March 31, 2022. Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the company advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said directions.
After considering the company’s reply to the notice, oral submissions made during the personal hearing and examination of additional submissions made by it, RBI found, inter alia, that the following charge against the company was sustained, warranting imposition of monetary penalty. The company did not comply with certain provisions of Fair Practices Code contained in the said directions, when it i) did not disclose rate of interest and approach for gradation of risk and rationale for charging different rate of interest to different categories of borrowers in loan application forms and sanction letters and ii) had charged pre-payment penalty in housing loans on (a) floating rate basis which were pre-closed from any source and (b) fixed rate basis which were pre-closed from borrowers’ own sources.
This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the company with its customers. Further, imposition of this monetary penalty is without prejudice to any other action that may be initiated by RBI against the company.
2 The Reserve Bank of India (RBI) has, by an order dated March 27, 2024 imposed a monetary penalty of Rs1.00 crore (Rupees One crore only) on IDFC First Bank Limited (the bank) for non-compliance with certain directions issued by RBI on ‘Loans and Advances – Statutory and Other Restrictions’. This penalty has been imposed in exercise of powers vested in RBI conferred under the provisions of section 47 A (1) (c) read with sections 46 (4) (i) of the Banking Regulation Act, 1949.
The Statutory Inspection for Supervisory Evaluation (ISE 2022) of the bank was conducted by RBI with reference to its financial position as on March 31, 2022. Based on supervisory findings of non-compliance with RBI directions / statutory provisions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said directions. After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI found, inter alia, that the following charge against the bank was sustained warranting imposition of monetary penalty. The bank had sanctioned term loans to a public sector undertaking for financing infrastructure projects, (i) without undertaking due diligence on the viability and bankability of the projects to ensure that revenue streams from the projects were sufficient to take care of the debt servicing obligations and (ii) the repayment / servicing of the said term loans was made out of budgetary resources.
The action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transactions or agreement entered into by the bank with its customers. Further, imposition of monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank.
