From kid gloves to sucker punch: What recent RBI crackdowns on JM Financial, IIFL and Paytm Payments Bank show
Reserve Bank of India (RBI) that they lost hundreds of crores of rupees in currency derivatives manipulatively sold by banks, the central bank slapped the lenders with penalties in the range of Rs 5-15 lakh. That was 2011.
Come 2024, when the regulator found IIFL Finance Ltd in violation of its guidelines on gold loans, it ordered the company to shutter the business, landing a debilitating blow.
The shift in the magnitude of the penalty between then and now not only captures how RBI has moved from kid gloves to boxing gloves in treating regulatory breaches, but also what is in store for potential violators.
“RBI’s penalties used to be in lakhs or a few crores of rupees,” said R Gandhi, former deputy governor of RBI. “There was criticism that it was not pinching enough to make them take corrective actions. When transgressions are systemic than transactional, it’s not a few transactions that need correction rather a procedure itself. Now the principle seems to be substantive penalties which will bring desired behavioral change. The message is: until you correct, you can’t grow.”
RBI under governor Shaktikanta Das has acquired a consultative approach to monetary policy as well as forming regulations in contrast to what it was under his predecessor Urjit Patel. But when it comes to treating the violators, it is punching with an iron fist.
BLUNTING BUSINESSES
The past few months have seen RBI penalising banks and non-banking finance companies for violations of its rules. There is a paradigm shift in its approach
