The Reserve Bank of India has imposed a monetary penalty of ₹2.70 lakh on Muthoot Vehicle and Asset Finance Limited for non-compliance with certain provisions of the RBI’s Know Your Customer directions.
The penalty order was dated July 13, 2026. RBI announced the action in a press release issued on July 17, 2026. The release identified the company as Muthoot Vehicle and Asset Finance Limited and said the action related to regulatory compliance under the Reserve Bank of India (Know Your Customer (KYC)) Directions.
What RBI found
According to RBI, one charge was sustained against the company after the supervisory process. The central bank said the company had failed to put in place a system for periodic review of the risk categorisation of accounts.
RBI stated that such a review should be carried out at least once every six months. In the context of KYC rules, risk categorisation refers to classifying customer accounts according to the level of risk assessed by the regulated entity. A periodic review means the classification is not treated as a one-time exercise and is revisited at defined intervals.
The press release did not say that the penalty was linked to any specific customer transaction. It also did not state that any customer agreement was invalid. RBI’s finding was limited to a compliance deficiency in the company’s system for reviewing account risk categories.
Inspection and show-cause process
The central bank conducted a statutory inspection of Muthoot Vehicle and Asset Finance Limited with reference to the company’s financial position as on March 31, 2025. Statutory inspections are part of RBI’s supervisory framework for checking whether regulated entities are following applicable legal and regulatory requirements.
Based on the inspection findings and related correspondence, RBI issued a notice to the company. The notice asked the company to show cause why a penalty should not be imposed for failure to comply with the directions cited by the central bank.
RBI said it considered the company’s reply to the notice. It also considered oral submissions made during a personal hearing. After reviewing these submissions, RBI concluded that the sustained charge warranted imposition of a monetary penalty.
Legal basis for the penalty
The penalty has been imposed under powers available to RBI under section 58G(1)(b), read with section 58B(5)(aa), of the Reserve Bank of India Act, 1934. These provisions were cited by RBI as the legal basis for imposing the monetary penalty.
The press release was issued as Press Release: 2026-2027/702 and carried the name of Brij Raj, Chief General Manager. The amount of the penalty was stated as ₹2.70 lakh.
RBI clarification
RBI clarified that the action is based on deficiencies in regulatory compliance. The central bank said the penalty is not intended to pronounce upon the validity of any transaction or agreement entered into by the company with its customers.
RBI also said the monetary penalty is without prejudice to any other action that may be initiated by the central bank against the company. This means the penalty order does not prevent RBI from taking any further action, if considered necessary under applicable law or regulations.
The key issue in the release is therefore procedural compliance with KYC requirements: RBI found that the company did not have the required system for reviewing the risk categorisation of accounts at least once every six months.
Source: Reserve Bank of India Press Releases.