RBI imposes monetary penalty on LIC Housing Finance Limited

Case Brief

RBI, by order dated March 27, 2024, imposed a monetary penalty of Rs 49,70,000 on LIC Housing Finance Limited under section 52A of the National Housing Bank Act, 1987. The penalty followed a statutory inspection and a show-cause process. RBI found that the company had not complied with certain Fair Practices Code provisions in the Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021. In particular, it did not disclose the rate of interest, the approach for gradation of risk, and the rationale for charging different interest rates to different categories of borrowers in loan application forms and sanction letters, and it charged pre-payment penalties in certain housing-loan cases. RBI stated that the action is based on regulatory compliance deficiencies and does not pronounce on the validity of the company’s transactions or agreements with customers.