New Delhi: In a sweeping move to ensure compliance and maintain the integrity of the banking sector, the Reserve Bank of India (RBI) has levied penalties on over 20 banks and Non-Banking Financial Companies (NBFCs) since the beginning of September. The magnitude of the regulatory action also extends to the cancellation of a bank’s license, highlighting the seriousness of the infractions involved.
L&T Finance Holding Limited Under Scrutiny
One of the prominent names on the list of penalized entities is L&T Finance Holding Limited. The RBI, in its official communication, revealed a penalty of Rs 2.5 crore imposed on L&T. The punitive action stems from the company’s non-compliance with specific norms pertinent to NBFCs.
Upon detailed examination of reports and a statutory inspection of L&T’s operations, the central bank identified several discrepancies. The NBFC reportedly failed to transparently disclose the risks and the rationale behind charging varied interest rates to different borrower categories on their loan application forms. Such an omission in the retail borrower segment, where transparency is crucial, became a significant point of contention.
Furthermore, the RBI highlighted another oversight by L&T Finance Holding Limited. The company did not duly inform its loanholders about alterations in the penal interest rate. This lapse led to loanholders being charged a punitive interest rate higher than what was initially stated during their application process.
RBI’s actions underscore
The RBI’s actions underscore the institution’s commitment to upholding the highest standards of transparency and accountability within the banking and financial sectors. By ensuring that all entities, irrespective of their size or stature, adhere to stipulated norms, the central bank aims to fortify the trust and confidence of the public in India’s financial institutions.