RBI imposes Monetary Penalty on Subsidiary of Muthoot Finance; Check Reason

The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs.10.50 lakh on Muthoot Money Limited, Ernakulam, Kerala (the company) one of the subsidiary of Muthoot Finance, for non-compliance with certain provisions of the ‘Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016’ by an order dated April 06, 2023.

This penalty was applied in accordance with the provisions of clause (b) of sub-section (1) of section 58G read in conjunction with clause (aa) of sub-section (5) of section 58B of the Reserve Bank of India Act, 1934.

This action is based on regulatory compliance deficiencies and is not meant to rule on the validity of any transaction or agreement entered into by the business with its customers.

The statutory inspection of the company was conducted by RBI with reference to its financial position as of March 31, 2021, and examination of the Risk Assessment Report, Inspection Report, supervisory letter, and all related correspondence pertaining to the same revealed, inter alia, non-compliance with the aforementioned RBI directions to the extent that it reported certain frauds to RBI with a delay. In addition, a notice was issued to the business advising it to show cause why a penalty should not be imposed on it for failing to comply with the RBI directions, as mentioned therein.

After considering the company’s response to the notice 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 justified imposition of monetary penalty on the company to the extent of non-compliance with the directions.