1) IIFL Finance Limited
The Reserve Bank of India (RBI) imposed a monetary penalty on IIFL Finance Limited following a statutory inspection evaluated against the company’s financial position as of March 31, 2024. The compliance breakdown is outlined below.
Key Details
| Entity Name | IIFL Finance Limited |
| Penalty Amount | ₹5.30 lakh (Rupees Five Lakh Thirty Thousand only) |
| Date of Order | February 06, 2026 |
| Statutory Provisions | Section 58G(1)(b) read with section 58B(5)(aa) of the Reserve Bank of India Act, 1934 |
| Violated Directions | Directions on ‘Asset Classification’ |
Root Cause Analysis (RCA)
Based on the RBI’s supervisory findings and the subsequent show-cause notice, the penalty was warranted by the following sustained charge:
- Asset Classification Failure: The company failed to classify certain accounts as ‘non-performing asset’, on restructuring.
Preventive Controls
- Automated System Tagging: Implement logic within the core lending platform to automatically flag and reclassify accounts as Non-Performing Assets (NPAs) the moment a restructuring event is initiated on a stressed account.
- Secondary Compliance Verification: Institute a mandatory secondary review by the risk or compliance team for all restructured portfolios before finalizing quarter-end asset classifications.
Lessons Learnt
- Strict Adherence to Prudential Norms: Restructuring an account does not mask its underlying stress; accurate and timely NPA classification is a fundamental regulatory requirement that cannot be bypassed.
- Penalties Address Compliance, Not Validity: The regulatory action is strictly 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.
RbI Press Release
2) Navi Finserv Limited
The Reserve Bank of India (RBI) imposed a monetary penalty on Navi Finserv Limited based on findings from a statutory inspection conducted with reference to the company’s financial position as on March 31, 2024. The compliance details are outlined below.
Key Details
| Entity Name | Navi Finserv Limited |
| Penalty Amount | ₹3.80 lakh (Rupees Three Lakh Eighty Thousand only) |
| Date of Order | February 10, 2026 |
| Statutory Provisions | Section 58G(1)(b) read with section 58B(5)(aa) of the Reserve Bank of India Act, 1934 |
| Violated Directions | Directions on ‘Recovery Agents’ |
Root Cause Analysis (RCA)
Following the issuance of a show-cause notice and subsequent oral submissions during a personal hearing, the RBI found the following charges sustained:
- Improper Contact Hours: The company contacted customers after 7:00 p.m. and before 8:00 a.m. for recovery of overdue loans.
- Protocol Violations: The company did not follow the due protocol while sending messages to customers.
Preventive Controls
- Telecom System Lockouts: Implement hard system restrictions in the outbound calling and SMS software that physically prevent agents and automated systems from dispatching communications outside the RBI-mandated 8:00 a.m. to 7:00 p.m. window.
- Message Templating & Approval: Restrict agent access to free-text messaging; ensure all outbound recovery messages are selected from pre-approved, legally vetted templates that conform to the Fair Practices Code.
Lessons Learnt
- Zero Tolerance for Harassment: Extending recovery operations beyond standard daylight hours is viewed strictly as a breach of customer rights and regulatory protocol. Institutions must maintain rigorous oversight over internal and external recovery agents.
- Unresolved Risk Exposure: The imposition of this monetary penalty is explicitly without prejudice to any other action that the RBI may initiate against the company, stressing the need for immediate, systemic operational overhauls.