RBI fines L&T Finance for keeping borrowers in dark over interest rates

The RBI on Friday said it has imposed a penalty of Rs 2.50 crore on L&T Finance for violating the central bank’s directions on disclosing adequate information to borrowers on the interest rates that they would be charged.

The penalty has been imposed as L&T Finance did not disclose to its retail borrowers the gradation of risk and rationale for charging different interest rates to different categories of borrowers in the loan application form/sanction letter.

The company also failed to notify the change in penal interest rate to its borrowers, when it charged penal interest rate, higher than what was communicated at the time of sanction, according to an RBI statement.

The release added that the company failed to give notice of change in terms and conditions of loan to its borrowers, when it charged annualised rate of interest, higher than what was communicated at the time of sanction.

The RBI had issued a show cause notice to L&T Finance and considered the company’s reply, additional submissions made by it and oral submissions made during the personal hearing.

The RBI said after this it came to the conclusion that the charge of non-compliance with its directions was substantiated and warranted imposition of a monetary penalty.