KOCHI: The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs4.50 lakh on Maxvalue Credits and Investments Ltd, a non-banking financial company (NBFC) based in Thrissur, Kerala.
The penalty stems from the company’s failure to comply with certain regulatory directives issued under the Non-Banking Financial Company – Systemically Important Non-Deposit Taking Company and Deposit Taking Company (Reserve Bank) Directions, 2016, as well as the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016.
The penalty follows a statutory inspection conducted by RBI based on the financial position of Maxvalue Credits as of March 31, 2021.
During the inspection, it was found that the company had violated several RBI guidelines, leading to the imposition of the monetary penalty.
A notice was issued to the company, advising it to show-cause why a penalty should not be levied. The company responded with a written reply and also participated in a personal hearing to present its case.
Several charges
After considering the company’s responses, RBI concluded that several charges of non-compliance were sustained, justifying the penalty.
The charges on which RBI based its penalty include failure to seek prior written permission for shareholding change.
The company did not seek prior written approval from RBI for a change in its shareholding that exceeded 26 per cent of its paid-up equity capital.
“As per RBI regulations, NBFCs are required to obtain prior approval for such significant changes in shareholding,” a financial expert told businessbenchmark.news.
Further, the company redeemed subordinated debts without obtaining consent from RBI. Such actions are prohibited under the regulatory framework governing NBFCs, as they may impact the company’s financial stability and capital adequacy.
Public deposits
More seriousy, Maxvalue Credits accessed public deposits in the form of subordinated debts and non-convertible debentures (NCDs), despite being classified as a non-deposit taking NBFC. According to RBI guidelines, non-deposit taking NBFCs are not permitted to accept public deposits in any form, including subordinated debts.
Maxvalue Credits has also failed to make certain mandatory disclosures in its Annual Financial Statements, which are required under the directions governing NBFCs.
“This non-compliance affects the transparency and completeness of financial reporting, which is critical for stakeholders, including investors and regulators,” explained an expert.
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