RBI Imposes Penalty Of ₹1.9 Lakh On Muthoot Finance For KYC Non-Compliance

The penalty was levied under the provisions of 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. The inspection unveiled several instances of non-compliance with the RBI's KYC directives.

Clause (b) of sub-section (1) of section 58G of the Reserve Bank of India Act, 1934 empowers the RBI to impose monetary penalties on banks and financial institutions for contraventions or non-compliance with any direction, rule, or regulation issued under the Act.

Following these findings, the RBI issued a notice to Muthoot Finance and demanded an explanation as to why a penalty should not be imposed. The company responded to the notice and made oral submissions during a personal hearing. However, the RBI held that Muthoot Finance had violated the KYC Directions by allotting multiple Unique Customer Identification Codes (UCIC) to individual customers.

Financial institutions are required to assign a UCIC to every individual customer. The KYC Directions mandate that each customer should be allotted a single UCIC to prevent the creation of multiple identities for the same customer.

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