RBI levies a monetary penalty of Rs10 lakh on Muthoot Finance for non-compliance

The Reserve Bank of India (RBI) has levied a fine of Rs10 lakh on Muthoot Finance for non-compliance with directions issued by RBI on the maintenance of Loan to Value ratio in gold loans and on obtaining a copy of PAN card of the borrower while granting gold loans over Rs5 lakh.

RBI had issued a notice to the company advising it to show cause as to why penalty should not be imposed for failure to comply with the directions issued by RBI.

"After considering the company’s reply to the notice, oral submissions made during the personal hearings and examination of additional submissions made by it, RBI concluded that the aforesaid charges of non-compliance with RBI directions were substantiated and warranted imposition of monetary penalty," RBI said.

According to the RBI, this penalty has been imposed in exercise of powers vested in RBI under the provisions of clause (b) of sub-section (1) of section 58 G read with clause (aa) of sub-section (5) of section 58B of the Reserve Bank of India Act, 1934, taking into account the failure of the company to adhere to the aforesaid directions issued by RBI. This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the company with its customers.

At around 2.31 pm, the company was trading at Rs1184.40 per piece up 1.26% on Sensex. The stock has gained nearly 2% with an intraday high of Rs1190 per piece in the second half trading session.