RBI Fines Muthoot Housing Finance Fair Practice Code Violation

The Reserve Bank of India (RBI) has levied a monetary penalty of Rs 80,000 on Muthoot Housing Finance Company Limited for non-compliance with certain directions issued by the RBI on the ‘Fair Practice Code’. RBI took this action under the powers given to it under Section 52A of the National Housing Bank Act, 1987. The aforementioned penalty has been imposed by the Central Bank of India through an order dated April 21, 2026.

Reason for the Penalty

The National Housing Bank had carried out a legal inspection of the company based on its financial position on March 31, 2025. During this inspection, non-compliance with RBI directions was found. Following this, the company was issued a notice asking why a penalty should not be imposed for failing to follow the required directions.
After reviewing the company’s response to the notice and the oral submissions made during the personal hearing, RBI found that the following violation had occurred, which led to the penalty.

Key Compliance Failure

The company did not clearly mention how it graded risk or explain why different interest rates were charged to different categories of borrowers. This information was missing from both the application forms and the sanction letters.

RBI’s Clarification

RBI clarified that this action was taken because of regulatory compliance failures. It does not affect the validity of any transaction or agreement between the company and its customers. RBI also stated that this monetary penalty does not prevent it from taking any further action against the company in the future.