RBI imposes penalties on IDFC First Bank, LIC Housing Finance for non-compliance

The Reserve Bank has imposed a penalty of Rs 1 crore on IDFC First Bank and Rs 49.70 lakh on LIC Housing Finance for violation of certain norms regarding loans. In a statement, the RBI said the penalty on IDFC First Bank has been imposed for non-compliance with certain directions on ‘Loans and Advances – Statutory and Other Restrictions’.

The Statutory Inspection for Supervisory Evaluation for FY22 revealed that the bank had sanctioned term loans to a public sector undertaking for financing infrastructure projects without undertaking due diligence on the viability and bankability of the projects to ensure that revenue streams from the projects were sufficient to take care of the debt servicing obligations. The repayment/servicing of the term loans was made out of budgetary resources.

On the other hand, LIC Housing Finance was fined Rs 49.7 lakh for breach of norms. The RBI said the housing finance company did not comply with certain provisions of the Fair Practices Code when it did not disclose the rate of interest and approach for gradation of risk and rationale for charging different rate of interest to different categories of borrowers in loan application forms and sanction letters. 

It had also charged pre-payment penalty in housing loans on a floating rate basis which was pre-closed from any source, and a fixed rate basis which was pre-closed from borrowers’ own sources.

In both cases, penalties are based on deficiencies in regulatory compliance and are not intended to pronounce upon the validity of any transaction or agreement entered into by them with their respective customers.

Meanwhile, the RBI has cancelled certificate of registration (CoR) of four NBFCs — Kundles Motor Finance, Nithya Finance, Bhatia Hire Purchase, and Jiwanjyoti Deposits and Advances.

The four companies now cannot transact the business of a non-banking financial institution.

Another five NBFCs have surrendered their CoR. These are — Growing Opportunity Finance (India), Invel Commercial, Mohan Finance, Saraswati Properties, and Quicker Marketing.

(With agency inputs)