RBI cancels registration of four non-banking financial companies
These companies include Uttar Pradesh-based Kundles Motor Finance Private Limited, Tamil Nadu-based Nithya Finance Limited, Punjab-based Bhatia Hire Purchase Pvt Ltd, and Himachal Pradeesh-based Jiwanjyoti Deposits and Advances Limited.
On Friday, April 5, the Reserve Bank of India (RBI) cancelled the certificate of registration of four non-banking financial companies including Uttar Pradesh-based Kundles Motor Finance Private Limited, Tamil Nadu-based Nithya Finance Limited, Punjab-based Bhatia Hire Purchase Pvt Ltd, and Himachal Pradesh-based Jiwanjyoti Deposits and Advances Limited.
Following this, the firms will no longer be permitted to conduct business as Non-Banking Financial Institutions, as specified in the RBI Act.
In other news, RBI also announced that it has imposed a monetary penalty of Rs 1 crore on IDFC First Bank Limited (the bank) today for non-compliance with certain directions issued by the central bank on 'Loans and Advances - Statutory and Other Restrictions'. According to an RBI announcement, this penalty was levied in the execution of the RBI's powers under the Banking Regulation Act of 1949.
Based on supervisory findings of non-compliance with RBI directions / statutory provisions and accompanying correspondence, the RBI issued a notice to the bank, directing it to show cause why a penalty should not be imposed for its failure to comply with the aforementioned directives.
After considering the bank's reply to the notice and oral submissions made during the personal hearing, RBI found, inter alia, that the charge against the bank was sustained warranting imposition of monetary penalty.
According to RBI, the bank had sanctioned term loans to a public sector undertaking for financing infrastructure projects, without undertaking due diligence on the viability and bankability of the projects to ensure that revenue streams from the projects were sufficient to take care of the debt servicing obligations; and the repayment / servicing of the said term loans was made out of budgetary resources.
"The action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transactions or agreement entered into by the bank with its customers.
Further, imposition of monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank," RBI said.
With agency inputs
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