RBI imposes Rs 6.77-crore penalty on M&M Financial Services; know why

The Reserve Bank of India (RBI) has imposed Rs 6.77-crore penalty on Mahindra & Mahindra Financial Services Ltd for non-compliance with norms related to disclosure of interest rates to borrowers at the time of sanction of loans, said the central bank on Thursday.

"RBI has, by an order dated April 5, 2023 imposed a monetary penalty of Rs 6.77 crore on Mahindra & Mahindra Financial Services Limited, Mumbai for non-compliance with the "Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016” issued by RBI," said the banking regulator.

RBI said the firm was found in non-compliance of directions on fair practices. RBI said the statutory inspection of Mahindra & Mahindra Financial Services was conducted with reference to its financial position as on March 31, 2019, and March 31, 2020.

"An examination of the Risk Assessment Report, Inspection Reports and all related correspondence pertaining to the
same revealed, inter alia, non-compliance by the company with the RBI directions on fair practices relating to disclosure of annualised rate of interest charged on loans to the borrowers at the time of sanction and failure to give notice of change in terms and conditions of loan to its borrowers, when it charged higher rate of interest than what was communicated at the time of sanction, during financial years 2018-19, 2019-20 and 2020-21. A notice was issued to the company advising it to show cause as to why penalty should not be imposed on it for failure to comply with the RBI directions, as stated therein," said RBI.

On Thursday, M&M Financial Services scrip closed 5% higher at Rs 252.

In another release, the RBI said a Rs 55 lakh penalty has been imposed on Indian Bank for contravention of certain Know Your Customer (KYC)) norms.

The Reserve Bank carried out scrutiny of the Indian Bank in July 2020 based on a high-value fraud reported by the bank.

A penalty of Rs 10.50 lakh on Muthoot Money Limited, Ernakulam for non-compliance with certain provisions of the 'Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016', has also been imposed.