Excerpt from Business Standard Article, Published on Aug 16, 2024
The Reserve Bank of India (RBI) has imposed significant penalties on three financial institutions for non-compliance with its regulatory directives. This action underscores the central bank’s stringent stance on ensuring adherence to its guidelines.
On August 8, 2024, the RBI levied a penalty of Rs 1.27 crore on Bank of Maharashtra (BoM) for multiple violations, including non-compliance with the ‘Loan System for Delivery of Bank Credit’, ‘Cyber Security Framework in Banks’, and ‘Know Your Customer’ (KYC) guidelines. The RBI’s investigation revealed that BoM failed to meet the stipulated regulatory standards, necessitating this punitive measure. After evaluating the bank’s responses, oral submissions during the personal hearing, and additional documentation, the RBI concluded that the violations warranted a monetary penalty for RBI non-compliance.
In addition to BoM, the RBI also fined Hinduja Leyland Finance Ltd Rs 4.90 lakh for non-compliance with specific provisions of the KYC Directions, 2016. The central bank emphasized that this action was due to deficiencies in regulatory compliance and not an assessment of the validity of transactions or agreements made by the company with its clients. Hinduja Leyland Finance’s failure to adhere to the KYC guidelines prompted the RBI to impose the penalty, reinforcing the importance of strict compliance with customer verification processes.
Furthermore, Poonawalla Fincorp Ltd faced a penalty of Rs 10 lakh for non-compliance with provisions of the ‘Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016’. The RBI found that Poonawalla Fincorp charged interest on loans from dates preceding the actual disbursal of these loans, which contradicted the terms and conditions communicated to customers. After reviewing the company’s reply to the notice, oral submissions, and additional evidence, the RBI determined that the charge was substantiated, leading to the imposition of the penalty.
These penalties highlight the RBI’s ongoing efforts to enforce regulatory compliance among financial institutions. By penalizing BoM, Hinduja Leyland Finance, and Poonawalla Fincorp for their lapses, the RBI aims to maintain the integrity of the banking and financial system. The actions serve as a stern reminder to all financial entities to strictly adhere to RBI guidelines to avoid punitive measures and ensure the smooth functioning of financial operations in India.
The RBI’s decisive action against these institutions for RBI non-compliance demonstrates its commitment to upholding regulatory standards and protecting the interests of consumers. As the financial sector continues to evolve, adherence to regulatory directives remains crucial for maintaining trust and stability within the industry.
To delve deeper into this topic, please read the full article on Business Standard.
