Manappuram Finance, a non-banking financial company (NBFC), has been fined Rs 20 lakh by the Reserve Bank of India (RBI) for failing to comply with certain provisions of NBFC regulations. The penalty was imposed because the NBFC did not classify certain gold loan accounts with overdue payments exceeding 90 days as Non-Performing Assets (NPAs).
In a press statement, the RBI announced that the monetary penalty of Rs 20 lakh was imposed on Manappuram Finance, Thrissur, based on an order dated 12 June 2023. The penalty was imposed under the authority granted to the RBI by the “Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016,” specifically sections 58G(1)(b) and 58B(5)(aa) of the Reserve Bank of India Act, 1934.
The RBI clarified that the penalty was a result of regulatory compliance shortcomings and should not be interpreted as a judgment on the validity of any transactions or agreements between the company and its customers.
The RBI explained that the penalty was a consequence of the company’s failure to comply with the aforementioned directions in two ways. Firstly, Manappuram Finance did not classify certain gold loan accounts with overdue payments exceeding 90 days as Non-Performing Assets (NPAs). Secondly, the company did not maintain the mandated Loan-to-Value (LTV) ratio in certain gold loan accounts during the fiscal year 2020-21. The RBI conducted a statutory inspection of the company’s financial position as of 31 March 2021, and reviewed reports and correspondence related to the inspection.
After reviewing the company’s response to the notice and considering additional submissions and oral hearings, the RBI concluded that the company’s non-compliance with the directions was substantiated, leading to the imposition of the monetary penalty.
This is not the first time that Manappuram Finance has faced penalties from the RBI. In November 2020, the central bank imposed a Rs 5 lakh penalty on the NBFC for failing to comply with directions regarding the verification of ownership of gold jewellery, as outlined in the “Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.”