The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹2.50 crore on L&T Finance Limited for 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 was levied under the relevant sections of the Reserve Bank of India Act, 1934. The regulatory action was taken following a statutory inspection of L&T Finance Limited, which revealed various deficiencies in compliance.
During the inspection, it was discovered that the company had failed to inform its retail borrowers about risk gradation and the rationale behind different interest rates for different borrower categories. They also did not notify borrowers of changes in penal interest rates when rates were higher than initially communicated, and did not provide notice of changes in loan terms and conditions when charging a higher annualized interest rate than what was communicated during sanction. The RBI issued a notice to the company, requesting reasons why a penalty should not be imposed for non-compliance.
After evaluating the company’s response to the notice and conducting a personal hearing, the RBI concluded that there was substantiated non-compliance with its directions. As a result, the monetary penalty was imposed to address the deficiencies in compliance. It’s worth noting that this regulatory action does not pass judgment on the validity of any transactions or agreements between the company and its customers.
