• The Reserve Bank of India (RBI) has imposed penalties on three housing finance firms  -- Godrej Housing Finance and Aadhar Housing Finance were fined Rs five lakh each, and Housing and Urban Development Corporation was fined Rs 3.5 lakh.
• The penalties were imposed after the RBI found instances of non-compliance during a statutory inspection.

The Reserve Bank of India (RBI) has imposed monetary penalties on three housing finance firms for non-compliance with its directions. The firms penalised are Godrej Housing Finance Ltd, Aadhar Housing Finance Ltd, and Housing and Urban Development Corporation Ltd.

The central bank has levied a fine of Rs five lakh each on Godrej Housing Finance and Aadhar Housing Finance, and Rs 3.5 lakh on Housing and Urban Development Corporation. These penalties have been imposed under the provisions of Section 52A of the National Housing Bank Act, 1987, which empowers the RBI to impose such penalties.

The decision to impose these penalties was taken after a thorough process. The RBI conducted a statutory inspection of the financial position of these firms as of March 31, 2022. The inspection was carried out by the National Housing Bank (NHB), the apex agency for regulation and supervision of housing finance companies in India. Following the inspection, the RBI found instances of non-compliance with its directions.

Violations Leading to Penalties

In the case of Godrej Housing Finance, the company failed to obtain two independent valuation reports before sanctioning certain loans of Rs 75 lakh and above. This is a clear violation of the RBI's directions, which require housing finance companies to obtain such reports to ensure the fair valuation of the property against which the loan is being sanctioned.

Aadhar Housing Finance was found to have charged interest on loans for a period prior to the actual disbursement of the loan or issuance of a cheque to certain borrowers. This is in contravention of the RBI's 'Fair Practices Code', which mandates that interest can only be charged from the date of disbursement of the loan.

HUDCO's Non-Compliance

The Housing and Urban Development Corporation was penalised for failing to undertake risk categorisation of its customers during the financial year 2021-22. The company also did not put in place a system for periodic review of risk categorisation of accounts. Furthermore, it did not create a floating charge on the assets invested by it in terms of Section 29B of the NHB Act, in favour of its depositors and register the same with the Registrar of Companies.

Upon discovering these violations, the RBI issued a notice to each of the companies, advising them to show cause as to why a penalty should not be imposed on them for their failure to comply with the RBI's directions. After considering the companies' replies to the notice, oral submissions during the personal hearing, and additional submissions made by them, the RBI decided to impose the penalties.