RBI Fines Hero FinCorp ₹10 Lakh After Finding Excess Interest Was Collected From Certain Loan Accounts

The Reserve Bank of India has imposed a ₹10 lakh monetary penalty on Hero FinCorp Limited after sustaining a finding that the non-banking financial company collected excess interest from certain loan accounts. The penalty was imposed by an RBI order dated 22 September 2026 and announced on 24 September 2026. RBI linked the action to non-compliance with its directions on Fair Practices Code for Lenders – Charging of Interest.

The official RBI press release says the statutory inspection was conducted with reference to Hero FinCorp’s financial position as on 31 March 2025. Following supervisory findings and related correspondence, RBI issued a show-cause notice. The regulator says it considered the company’s reply, additional submissions and oral submissions made during a personal hearing before concluding that the charge was sustained.

RBI sustained one specific charge: excess interest collection

The operative finding in the September 2026 release is narrow and should be reported that way. RBI states that Hero FinCorp collected excess interest from certain loan accounts. The release does not identify those accounts, state the aggregate excess amount, disclose the number of affected borrowers or say that every loan product was involved.

RBI imposed the penalty under section 58G(1)(b) read with section 58B(5)(aa) of the Reserve Bank of India Act, 1934. The regulator also repeats its standard enforcement qualification: the action is based on deficiencies in regulatory compliance and is not intended to pronounce on the validity of transactions or agreements between the company and its customers. The penalty is also without prejudice to any other action RBI may initiate.

The release does not explain how the excess interest arose

The RBI release does not specify the calculation error or operational practice that caused the excess collection. It does not say whether the issue arose from the date from which interest was charged, the treatment of disbursement or repayment dates, a system configuration, a manual posting, or some other cause. It would therefore be inaccurate to attribute a particular mechanism to Hero FinCorp without further evidence.

For finance, internal-audit and lending-compliance teams, that limitation is important. The defensible control response is to reconcile interest actually collected against the applicable loan terms and RBI charging-of-interest requirements, test system logic and exception handling, and retain borrower-level evidence showing how any correction or refund is identified and completed. Those are control implications from the sustained finding, not additional factual allegations against the company.

The 2026 finding is different from Hero FinCorp’s 2024 RBI penalty

Hero FinCorp was also penalised by RBI in May 2024, but for a different compliance issue. In the 2024 Hero FinCorp enforcement release, RBI imposed a ₹3.10 lakh penalty after finding that loan terms and conditions had not been conveyed in writing in the vernacular language understood by borrowers. The present ₹10 lakh action concerns excess interest collection. The two orders should not be merged into a single allegation.

CA Samaaj has also covered a separate September 2026 RBI penalty on Hinduja Leyland Finance involving microfinance-pricing governance and synthetic securitisation. That case likewise illustrates why the exact sustained charge in each RBI order matters more than treating different NBFC enforcement actions as one common breach.

What lending teams should verify after this order

• Reconcile borrower-level interest charged and collected with the applicable contractual and regulatory basis.
• Test whether core lending systems calculate interest from the correct event and date under the applicable rule set.
• Review manual overrides, back-dated entries, reversals and exception reports that can change the amount ultimately collected.
• Maintain a traceable process for identifying and resolving any excess collection, including borrower communication and payment evidence where applicable.
• Keep the RBI order’s limits in view: it establishes the sustained compliance finding stated by RBI, but does not disclose the amount of excess interest or the affected borrower population.

The September 24 release therefore has a precise compliance message. RBI has found excess interest collection in certain Hero FinCorp loan accounts and imposed a ₹10 lakh penalty, while leaving the underlying account-level mechanics and quantum unstated. Professional users should preserve that distinction rather than expanding the order beyond what the regulator has actually established.

Official source: View the official source document