The Reserve Bank of India (RBI) imposed a fine of Rs 8.80 lakh on Power Finance Corporation Ltd for violation of norms related to liquidity risk management framework for non-banking financial companies and core investment companies.
The statutory inspection of the company was carried out by RBI. This inspection inter alia revealed that the Company had included ineligible assets as high quality due to which the prescribed Liquidity Coverage Ratio (LCR) of 60 per cent was not maintained by the Company till March 31, 2022.
As a result, a show cause notice has been issued to the company advising why penalty should not be imposed on the company as it has not complied with the directions given by RBI.
The company gave its reply to the show cause notice, apart from which some additional presentations were also given. RBI analyzed the response given by the company and additional submissions submitted. Further, RBI also considered the oral submissions which were made during the personal hearing and ultimately came to the conclusion that the allegations made against Power Finance Corporation Limited of non-compliance with RBI directions are proved. Therefore it became necessary to impose monetary penalty on the company.
However, the RBI said the action was based on deficiencies in regulatory compliance and that it was not intended to adjudicate on the validity of any agreement or transaction entered into by the company with its customers.