LI Network
Published on: October 21, 2023 at 11:18 IST
The Reserve Bank of India (RBI) announced on Friday that it has imposed a penalty of Rs 2.50 crore on L&T Finance for breaching the central bank’s directives regarding the disclosure of comprehensive information to borrowers concerning the interest rates they would incur.
The penalty was enforced due to L&T Finance’s failure to apprise its retail borrowers about the risk classification and justification behind applying varying interest rates to different borrower categories in the loan application form or sanction letter.
Furthermore, the company neglected to inform borrowers of changes in the penal interest rate, particularly when charging a higher rate than initially communicated at the time of sanction, as highlighted in the RBI statement.
The RBI’s statement also noted that the company omitted notifying borrowers of adjustments in loan terms and conditions when implementing an annualized interest rate exceeding the one communicated at the time of sanction.
The RBI’s actions followed a show cause notice issued to L&T Finance. The regulatory body considered the company’s response, additional submissions, and oral presentations during a personal hearing.
Subsequently, the RBI concluded that the allegations of non-compliance with its directives were substantiated, justifying the imposition of a financial penalty. This decision emphasizes the importance of transparency and adherence to regulatory guidelines in the financial sector.
