RBI imposes Monetary Penalty on Power Finance Corporation Limited

The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs.8.80 lakh on Power Finance Corporation Limited, New Delhi (the company) for non-compliance with certain provisions of the RBI’s directions on ‘Liquidity Risk Management Framework for Non-Banking Financial Companies and Core Investment Companies’ by an order dated February 6, 2024.

The RBI conducted a statutory inspection of the company with reference to its financial position as of March 31, 2022, and examination of the Risk Assessment Report, Inspection Report, supervisory letter, and all related correspondence pertaining to the same revealed, inter alia, that the company had not maintained the prescribed Liquidity Coverage Ratio (LCR) of 60% as on March 31, 2022 as a result of including ineligible assets as High-Quality Liquid Assets (HQLA).

As a result, a notice was sent to the company urging it to show cause why a penalty should not be levied for failing to comply with the RBI orders, as specified therein.

After considering the company’s response to the notice, an examination of additional submissions made by it, and oral submissions made during the personal hearing, the RBI concluded that the charge of non-compliance with the aforementioned RBI directions was substantiated and warranted the imposition of a financial penalty.

This penalty was issued in accordance with RBI’s authority under clause (b) of sub-section (1) of section 58G and clause (aa) of sub-section (5) of section 58B of the Reserve Bank of India Act, 1934.

This action is based on shortcomings in regulatory compliance and is not intended to rule on the legitimacy of any transaction or agreement entered into by the company with its clients.