RBI Slaps Penalties on IDFC First Bank and LIC Housing Finance for Regulatory Breaches

RBI Slaps Penalties on IDFC First Bank and LIC Housing Finance for Regulatory Breaches

6 April 2024 – The Reserve Bank of India (RBI) has imposed penalties on IDFC First Bank and LIC Housing Finance for non-compliance with regulatory norms pertaining to loans. IDFC First Bank has been fined Rs 1 crore, while LIC Housing Finance faces a penalty of Rs 49.70 lakh.

In a move to enforce regulatory compliance, the RBI has penalized IDFC First Bank and LIC Housing Finance for violations related to loan norms. These penalties underscore the importance of adhering to regulatory guidelines in the financial sector.

The penalty on IDFC First Bank was levied due to its failure to comply with specific directives concerning ‘Loans and Advances – Statutory and Other Restrictions’. The RBI’s inspection for supervisory evaluation during FY22 revealed that the bank sanctioned term loans for infrastructure projects without conducting adequate due diligence. Consequently, loans were repaid using budgetary resources rather than revenue generated from the projects.

Similarly, LIC Housing Finance incurred a penalty for breaching provisions of the Fair Practices Code. The housing finance company neglected to disclose crucial information such as interest rates, risk gradation approach, and the rationale behind charging different interest rates to various borrower categories. Additionally, it imposed pre-payment penalties on both floating and fixed-rate housing loans, irrespective of the source of pre-closure.