RBI Slaps Penalty on Mahindra & Mahindra Financial Services Limited for Fair Practices and Ombudsman Norm Violations

The Reserve Bank of India (RBI) has issued a press release dated February 27, 2026, levying a penalty amounting to Rs. 11.50 lakh on Mahindra & Mahindra Financial Services Limited, in use of its powers granted under Section 58G(1)(b) read with Section 58B(5)(aa) of the Reserve Bank of India Act, 1934.

The said penalty has been imposed on the company for non-adherence with certain directions issued by the RBI (Reserve Bank of India) concerning the ‘Fair Practices Code’ and ‘Internal Ombudsman for Regulated Entities’.

On March 31, 2025, the Central Bank had conducted a statutory inspection of the company based on its financial position. During the inspection, the central bank found some instances where the company did not follow RBI’s rules. Subsequently, the RBI issued a show cause notice (SCN) addressed to the company, asking it to explain why a penalty should not be imposed on it for failure to comply with the said RBI’s directions.

The company furnished a reply to the notice and oral submissions during the personal hearing. However, after reviewing the reply and the findings, the RBI still found the company liable for a monetary penalty for the violations it committed.

Here is a list of violations committed by the company:

1. Foreclosure Charges Issue

• The company charged revised foreclosure fees to some borrowers without properly including the revised condition in their loan agreements.

2. Internal Ombudsman and Complaint Handling Issues

• Some customer complaints that were partly or fully rejected by the company’s Internal Grievance Redress Mechanism were not escalated to the Internal Ombudsman within the required time.
• In certain cases, the company did not communicate the final decision on complaints to customers within the prescribed time limit.

RBI clarified that the penalty is based only on regulatory compliance gaps. It does not question the validity of any loan agreements or transactions entered into by the company with its customers. The central bank also stated that this penalty does not prevent it from taking any further action against the company in the future, if required.