Recorded RBI impact
Fine: Rs 2.00 L
Monetary penalty · Fresh imposition
Published by RBI
22 May 2023
Case Brief
The Reserve Bank of India imposed a monetary penalty of Rs 2.00 lakh on M/s Srestha Finvest Limited, Chennai, Tamil Nadu, under the RBI Act, 1934. RBI found that the company failed to obtain prior approval for the appointment of directors, in breach of directions applicable to a non-banking financial company - non-systemically important non-deposit taking company concerning acquisition or transfer of control of NBFCs. The company’s letter dated March 24, 2022 revealed a change in management involving more than 30% of directors (excluding independent directors). After issuing a show-cause notice and considering the company’s reply and oral submissions, RBI concluded that the contravention was substantiated and warranted penalty.
Why RBI Acted
RBI imposed a monetary penalty under section 58G read with section 58B(5)(aa) of the RBI Act, 1934 for failure to comply with directions applicable to a non-banking financial company - non-systemically important non-deposit taking company. The examination of the company’s letter dated March 24, 2022, intimating appointment of directors, showed that prior RBI approval had not been obtained for the appointments, leading to a change in management of the NBFC by more than 30% of the directors, excluding independent directors. After a show-cause notice, reply, and oral submissions, RBI found the non-compliance substantiated and imposed the penalty.
Operating Impact
The company must absorb the monetary penalty; the release does not announce a business restriction or licensing action. The main forward-looking consequence is regulatory censure for deficient compliance with RBI prior-approval requirements, with no stated operational curbs on customers, borrowers, or counterparties.
Regulatory Basis
- clause (b) of sub-section (1) of section 58G read with clause (aa) of sub-section (5) of section 58B of the Reserve Bank of India Act, 1934
Action Facts
- Primary Impact
- Fine: Rs 2.00 L
- Order Date
- 18 May 2023
- Effective From
- 18 May 2023
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- NBFC