The Reserve Bank of India (RBI) has imposed monetary penalties on Shriram Finance Limited and Ujjivan Small Finance Bank Limited for non-compliance with various regulatory guidelines. The penalties were imposed following statutory inspections conducted by the central bank for the financial year ending March 31, 2023.
Penalty on Shriram Finance Limited
By an order dated February 10, 2025, the RBI has levied a penalty of ₹5.80 lakh on Shriram Finance Limited. The company was found to be in violation of provisions under the Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016, the Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016, and the RBI’s directions on Data Format for Furnishing of Credit Information to Credit Information Companies.
During the inspection, RBI identified three key areas of non-compliance:
- The company failed to establish a system for periodic review of risk categorization of accounts.
- Certain agreements with Direct Sales Agents lacked a clause granting RBI the right to inspect their books and accounts.
- The company did not share information about the Relationship Segment of corporates with Credit Information Companies during the financial year 2022-23.
The RBI clarified that this penalty is based on regulatory deficiencies and does not affect the validity of transactions or agreements between the company and its customers. It further stated that additional actions may be initiated against Shriram Finance Limited if necessary.
Penalty on Ujjivan Small Finance Bank
In a separate action, the RBI imposed a ₹6.70 lakh penalty on Ujjivan Small Finance Bank Limited for failing to comply with the RBI’s guidelines on Loans and Advances – Statutory and Other Restrictions.
The bank was penalized for failing to issue loan agreements to certain borrowers at the time of sanction or disbursement of loans. The RBI’s supervisory inspection (ISE 2023) found this to be a serious regulatory lapse, leading to the monetary penalty.
Similar to its stance on Shriram Finance, the RBI emphasized that the penalty is strictly for non-compliance with regulations and does not impact the legitimacy of the bank’s transactions or agreements with its customers.
The latest penalties highlight RBI’s commitment to enforcing regulatory compliance among financial institutions, ensuring better transparency and adherence to guidelines. The central bank continues to conduct periodic inspections and take corrective actions where necessary to safeguard consumer interests and maintain the integrity of the financial system.
Both Shriram Finance Limited and Ujjivan Small Finance Bank are expected to take corrective measures to address the identified deficiencies and strengthen their internal compliance mechanisms.
