The Reserve Bank of India (RBI) has imposed monetary penalties amounting to ₹68.1 lakh on Nainital Bank Ltd and Ujjivan Small Finance Bank for non-compliance with various regulatory norms. Additionally, Shriram Finance, a non-banking financial company (NBFC), has also been fined for failing to meet compliance requirements related to customer verification and credit reporting.
Breakdown of Penalties
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Nainital Bank Ltd: The highest penalty of ₹61.4 lakh was levied on Nainital Bank for failing to comply with RBI’s directives on ‘Interest Rate on Advances’ and ‘Customer Service in Banks.’ The violations primarily involved issues related to how the bank determines interest rates on loans and its adherence to customer service norms set by the regulator.
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Ujjivan Small Finance Bank: The bank was fined ₹6.7 lakh for not complying with RBI’s norms related to ‘Loans and Advances – Statutory and Other Restrictions’. These restrictions are meant to ensure that loans are disbursed fairly and in accordance with regulatory guidelines to prevent financial irregularities.
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Shriram Finance: The non-banking financial entity was penalized ₹5.8 lakh for non-compliance with Know Your Customer (KYC) guidelines and failing to meet the prescribed reporting format for credit information under RBI’s ‘Data Format for Furnishing of Credit Information to Credit Information Companies’ directive. The regulator flagged deficiencies in how the company maintained customer identity verification records and reported financial data.
RBI’s Justification for the Fines
In its statement, the RBI clarified that these penalties were imposed due to regulatory lapses rather than any specific transaction with customers. The penalties serve as corrective measures to ensure better compliance with banking regulations.
Moreover, the central bank emphasized that these fines do not absolve the entities from further regulatory scrutiny. The RBI reserves the right to initiate additional enforcement actions if the violations are not rectified or if similar compliance failures occur in the future.
The Broader Impact on the Banking and NBFC Sectors
This latest action by the RBI underscores the regulator’s strict stance on financial discipline. The central bank has been actively monitoring financial institutions to ensure they adhere to rules governing interest rates, loan disbursements, customer verification, and credit reporting.
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Recent trends suggest that regulatory oversight has intensified, with increased scrutiny of banks and NBFCs, particularly in areas related to loan disbursement transparency, customer service, and financial reporting compliance.
By imposing these penalties, the RBI aims to:
- Enhance accountability among banks and NBFCs
- Ensure customers are treated fairly
- Prevent financial malpractices in loan disbursal and interest rate policies
- Strengthen the overall banking ecosystem
As the financial sector evolves, banking institutions and NBFC are expected to tighten their compliance mechanisms and align their operations with regulatory guidelines to avoid such penalties in the future.
