The Reserve Bank of India (RBI) has taken strict action against NABFINS Limited, a subsidiary of NABARD, by imposing a monetary penalty of ₹10 lakh (Rupees Ten lakh only) for non-compliance with certain provisions of the Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.
Monetary Penalty
In an order dated April 15, 2024, the RBI announced the penalty after conducting a statutory inspection of NABFINS Limited. The inspection focused on the company’s financial position as of March 31, 2022. Based on supervisory findings of non-compliance with RBI directions and related correspondence, the RBI issued a notice to the company, giving it an opportunity to explain why a penalty should not be imposed for its failure to adhere to the specified directions.
After considering the company’s response to the notice, oral submissions made during the personal hearing, and additional submissions, the RBI found that NABFINS Limited had adopted a restrictive practice. The company was compelling its customers to opt for a particular insurance company for assets financed by NABFINS Limited. This practice violated the RBI’s directions and warranted the imposition of a monetary penalty.
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It is important to note that the RBI’s penalty is based on the deficiencies in regulatory compliance and does not pass judgment on the validity of any transaction or agreement entered into by NABFINS Limited with its customers. The imposition of the monetary penalty is a standalone action and does not preclude the RBI from initiating further measures against the company.
The RBI’s actions reinforce its commitment to maintaining a robust regulatory framework and ensuring that financial institutions adhere to the specified guidelines. Non-compliance with regulatory directions can have serious consequences, as demonstrated by the monetary penalty imposed on NABFINS Limited.
The RBI continues to monitor and supervise financial institutions to safeguard the interests of consumers and maintain the stability of the financial system. It is expected that this penalty will serve as a deterrent to other non-compliant entities and encourage strict adherence to the regulatory framework.
For further information, please refer to the official press release on the Reserve Bank of India’s website: Link to the press release.
Dated: April 19, 2024
Disclaimer: This news article is based on the press release by the Reserve Bank of India. The information provided is accurate as of the date mentioned in the press release.