The Reserve Bank of India (RBI) has taken strict action against three non-banking financial organisations (NBFCs). On September 3, 2024, and September 11, 2024, respectively, these penalties were imposed. Among the companies that received penalties were Hewlett Packard Financial Services (India) Private Limited, SMFG India Credit Company Limited and Muthoot Vehicle & Asset Finance Limited. Penalties were issued for violation of regulations.
Hewlett Packard Financial Services Penalized for KYC Violations
On September 3, 2024, Hewlett Packard Financial Services (India) Private Limited faced a fine of Rs 10.40 lakh. This followed an RBI inspection that focused on the company’s financial position as of March 31, 2022. The inspection uncovered violations of the ‘Know Your Customer’ (KYC) guidelines, among other lapses.
According to the RBI, it used its authority to ensure adherence to significant financial norms and took this action in accordance with the Reserve Bank of India Act, 1934. These regulations are essential for maintaining the NBFCs’ integrity and making sure they run transparently.
SMFG India Credit Company Fined for IT and Cybersecurity Failures
SMFG India Credit Company Limited, formerly known as Fullerton India Credit Company, was hit with a larger penalty of Rs 23.10 lakh on September 4, 2024. RBI imposed this penalty due to several shortcomings related to IT and cybersecurity protocols.
A control gap assessment in April 2023 revealed that SMFG failed to properly monitor its outsourced vendors. The company also neglected to carry out essential IS audits for its network and security systems and did not maintain important audit logs. Such lapses pose risks to customer data and the overall security of financial operations.
Muthoot Vehicle & Asset Finance Penalized for Liquidity Risk Management Lapses
The third penalty, Rs 7.90 lakh, was imposed on Muthoot Vehicle & Asset Finance Limited on September 11, 2024. This fine was related to violations of the RBI’s liquidity risk management framework.
The RBI discovered that Muthoot failed to release its Liquidity Coverage Ratio (LCR) on its website during a required assessment. Additionally, the corporation failed to provide loan sanction letters in the vernacular language, which is necessary for transparency in auto loan agreements, and it did not provide client data to credit information organisations.
Penalties Reflect Regulatory Enforcement, Not Business Operations
In all these cases, the Reserve Bank of India clarified that the penalties are meant to address non-compliance with regulations. These actions don’t reflect on the validity of the transactions or services provided by the companies. However, RBI has stressed that further actions could be taken against these NBFCs if needed.
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