On July 11, the Reserve Bank of India (RBI) fined two financial companies for not following some of its rules. HDFC Bank incurred a penalty of ₹4.88 lakh, while Shriram Finance Limited was penalized ₹2.70 lakh. The Reserve Bank of India (RBI) explained that the fines are just for breaking some regulatory rules. These penalties do not mean that the loans they gave or the agreements they made with customers were illegal or incorrect.
Why RBI Fined HDFC?
- HDFC Bank broke some rules related to foreign investment while giving a loan to a customer. These rules come under FEMA (Foreign Exchange Management Act).
- RBI noticed the issue and sent a notice to the bank asking for an explanation.
- HDFC Bank gave a written explanation and also explained its side in a meeting.
- After reviewing the case, RBI decided that the bank did break the rules, so a penalty was necessary and fined the bank ₹4.88 lakh (₹488,000).
Why RBI Fined Shriram Finance Limited?
- Press Trust of India (PTI), a news agency, informed that The Reserve Bank of India (RBI) carried out an official inspection of Shriram Finance Limited to check its financial health and operations on March 31, 2024. This means RBI reviewed records, transactions, and compliance with rules up to that date.
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RBI found that some borrowers were repaying their loans through a third-party account, not directly to Shriram Finance and this was against RBI’s digital lending rules, which say that repayments must go directly from the borrower to the lender.
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RBI sent them a notice and gave Shriram Finance a chance to explain, but in the end, decided a penalty was appropriate and fined the bank ₹2.70 lakh (₹270,000).
RBI has strict rules to ensure that banks and financial companies operate fairly and transparently. When these rules are broken even if the company explains their side the RBI can still impose a fine to make sure rules are taken seriously.