The Reserve Bank of India (RBI) has imposed monetary fines on Indian Overseas Bank (IOB) and Mahindra and Mahindra Financial Services Limited for non-compliance with RBI directives. The fines amount to Rs 63.60 lakh for IOB and Rs 71.30 lakh for Mahindra and Mahindra Financial Services Limited. The RBI periodically audits the accounts of banks and Non-Banking Finance Companies (NBFCs) and found that both IOB and Mahindra and Mahindra Financial Services Limited did not comply with certain directions.
IOB was fined for non-compliance with RBI directives on loans to the agricultural sector and Micro, Small, and Medium Enterprises (MSMEs). Specifically, the bank failed to obtain collateral security for agricultural loans up to Rs 1.60 lakh in certain cases and for loans up to Rs 10 lakh provided to certain Micro and Small Enterprise borrowers. In India, agricultural loans up to Rs 2 lakh are collateral-free, and loans up to Rs 10 lakhs are collateral-free in the MSME sector.
Mahindra and Mahindra Financial Services Limited was fined for non-disclosure of processing fees and other charges in certain loan application forms, failure to provide copies of loan agreements and loan details to certain borrowers, failure to provide a final chance to certain borrowers to repay loans before the sale/auction of vehicles, and issuing multiple customer identification codes to certain customers instead of a Unique Customer Identification Code (UCIC).
IOB is a public sector bank founded in 1937 and nationalized in 1969. It has overseas branches and offices in several countries, including Singapore, Hong Kong, Thailand, and Sri Lanka. Mahindra and Mahindra Financial Services Limited, on the other hand, is a non-banking financial company established in 1991 and part of the Mahindra Group. It offers various financial services, including vehicle loans, SME finance, and personal loans.
The fines imposed by the RBI are a reminder of the importance of compliance with regulatory directives. The RBI’s actions aim to protect the interests of borrowers and ensure that financial institutions operate in a fair and transparent manner. The fines also highlight the need for banks and NBFCs to review their internal processes and ensure that they are in compliance with regulatory requirements.