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RBI imposes Rs 2.5 crore fine on L&T Finance

The Reserve Bank of India said L&T Finance failed to notify the change in penal interest rate to borrowers, when it charged penal interest rate higher than what was communicated at the time of sanction. The central bank said penalty is based on the deficiencies in regulatory compliance

Updated On Oct 21, 2023 at 08:47 AM IST

The Reserve Bank of India on Friday said a penalty of Rs 2.5 crore has been imposed on L&T Finance Ltd for non-compliance with certain norms concerning non-banking financial companies (NBFCs). After examination of reports following statutory inspection of the company, the RBI said it was revealed that the NBFC did not disclose to its retail borrowers, the gradation of risk and rationale for charging different interest rates to different categories of borrowers in the loan application form/sanction letter.

It also failed to notify the change in penal interest rate to borrowers, when it charged penal interest rate higher than what was communicated at the time of sanction, the RBI said.

"After considering the company's reply to the notice, additional submissions made by it and oral submissions made during the personal hearing, the RBI came to the conclusion that the charge of non-compliance... was substantiated and warranted imposition of monetary penalty, to the extent of such non-compliance with such directions," it said.

The RBI also said penalty is based on the 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.