L&T Finance Limited has been subject to regulatory action by the Reserve Bank of India (RBI), who fined the business 2.50 crore (Rupees Two crore Fifty lakh only).
This action followed non-compliance with certain terms of the Non-Banking Financial Company – Systemically Important Non-Deposit Taking Company and Deposit Taking Company (Reserve Bank) Directions, 2016 according to a news statement published by RBI.
The RBI imposed the fine in accordance with the relevant provisions of the Reserve Bank of India Act, 1934.
It’s important to remember that this regulatory action is intended to resolve compliance issues and is not intended to be interpreted as a verdict on the legality of any transactions or agreements between the firm and its clients.
Following a statutory examination of L&T Finance Limited, which covered its financial situation as of March 31, 2021, and March 31, 2022, the RBI made its conclusion.
The analysis of numerous reports and communications was part of this inspection. The firm failed to tell its retail consumers about the risk gradation and the justification for the various interest rates applied to different borrower groups in loan application forms or sanction letters, which was one of several problems found during the inspection.
Additionally, when punitive interest rates increased from what had been first disclosed, the corporation failed to inform borrowers of the change.
When charging an annualized interest rate greater than what was disclosed at the time of sanction, it also neglected to notify borrowers of changes in the loan’s terms and conditions.
The RBI then sent L&T Finance Limited a letter asking for justifications as to why a fine shouldn’t be levied for failing to follow the RBI’s instructions.
The RBI came to the conclusion that there was a proven allegation of failure to comply with the RBI directives after considering the company’s response to the notice, further submissions, and oral testimony provided during a personal hearing.
In order to remedy this non-compliance, it was decided that a monetary fine should be imposed.
