RBI cancels registration of four non-banking financial companies

Those companies are 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.

These companies will now not be able to transact the business of a Non-Banking Financial Institution as defined in the RBI Act.

In other news, the Reserve Bank of India (RBI) today imposed a monetary penalty of Rs 1 crore on IDFC First Bank Limited (the bank) for non-compliance with certain directions issued by the central bank on 'Loans and Advances - Statutory and Other Restrictions'.

According to an RBI release, this penalty has been imposed in the exercise of powers vested in RBI under the Banking Regulation Act, of 1949.

Based on supervisory findings of non-compliance with RBI directions / statutory provisions and related correspondence in that regard, a notice was issued by the RBI to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said directions.

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. (ANI)