RBI levies up to ₹23L fines on 3 NBFCs
What's the story
The Reserve Bank of India (RBI) has imposed monetary penalties on three non-banking financial companies (NBFCs), for regulatory violations and non-adherence to RBI directives. The fines were levied between September 3 and 11, on Hewlett Packard Financial Services (India) Private Limited, Muthoot Vehicle & Asset Finance Limited, and SMFG India Credit Company Limited. These actions were taken following inspections by the RBI that revealed various instances of non-compliance.
First penalty
HP Financial Services fined for KYC non-compliance
On September 3, the RBI imposed a fine of ₹10.4 lakh on Hewlett Packard Financial Services (India) Private Limited. This action comes following an inspection by the RBI based on the company's financial position as of March 31, 2022. The penalty was levied due to non-compliance with the 'Know Your Customer (KYC)' guidelines and several other directives applicable to systemically important non-deposit-taking NBFCs.
IT lapses
SMFG India Credit Company faces penalty for IT, cybersecurity lapses
On September 4, SMFG India Credit Company Limited (formerly known as Fullerton India Credit Company Limited), was fined ₹23.1 lakh for infringing RBI's Information Technology (IT) and cybersecurity guidelines. During a control gap assessment in April 2023, the RBI discovered that SMFG failed to include provisions for monitoring and oversight in its contracts with outsourced vendors, neglected to conduct IS audits for security and network systems, and didn't retain critical audit logs.
Management violations
Muthoot penalized for liquidity risk management violations
On September 11, Muthoot Vehicle & Asset Finance Limited was penalized ₹7.9 lakh for non-compliance with RBI's liquidity risk management framework and relevant guidelines. The statutory inspection revealed that Muthoot had failed to disclose its Liquidity Coverage Ratio (LCR) on its official website, did not submit customer data to credit information firms, and failed to issue loan sanction letters in the vernacular language to vehicle loan borrowers.
Penalty clarification
RBI clarifies penalties are not judgments on transactions
The RBI clarified that these penalties were based on regulatory compliance deficiencies and were not judgments on the validity of any transactions or agreements. The central bank also stated that further actions may be taken against these firms if deemed necessary. This clarification underscores the RBI's commitment to ensuring adherence to its guidelines among NBFCs.