RBI Penalises Shri Ram Finance Corporation ₹8.10 Lakh Over Governance and KYC Compliance Lapses
The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹8.10 lakh on Shri Ram Finance Corporation Private Limited, a non-banking financial company, for non-compliance with RBI directions on governance and Know Your Customer (KYC). The penalty was imposed by an order dated 19 August 2026 and announced in RBI Press Release No. 2026-2027/943 dated 21 August 2026.
Legal basis
RBI imposed the penalty under section 58G(1)(b) read with section 58B(5)(aa) of the Reserve Bank of India Act, 1934, the provisions that empower it to penalise NBFCs for contravening its directions.
How the case arose
RBI conducted a statutory inspection of the company with reference to its financial position as on 31 March 2025. It then issued a show-cause notice asking the company why a penalty should not be imposed. After considering the company's reply, RBI found the following charges sustained.
The three lapses RBI found
| Area | What the company failed to do |
|---|---|
| Governance | It did not take RBI's prior written permission while appointing a director, which resulted in a change in management because more than 30 per cent of its directors, excluding independent directors, changed. |
| KYC: risk categorisation | It did not put in place a system to categorise customers into low, medium and high risk. |
| KYC: CKYCR upload | It did not upload the KYC records of certain customers to the Central KYC Records Registry within the prescribed time. |
RBI said the action is based on deficiencies in regulatory compliance and is not intended to pronounce on the validity of any transaction or agreement the company has entered into with its customers.
Another NBFC penalised the same day
On the same date RBI also announced a ₹2.70 lakh penalty on Progfin Private Limited under its KYC Directions. In that case, RBI found that the company had not put in place a system of periodic review of risk categorisation of accounts at least once in six months. Taken together, the two orders show RBI inspections checking not just whether customers are risk-categorised at onboarding, but whether that categorisation is reviewed on schedule.
What NBFC compliance teams should check
- Board changes: Track cumulative changes in non-independent directors. Where changes cross the 30 per cent mark, RBI's prior written approval is needed before the appointment takes effect.
- Risk categorisation: Confirm that every customer is assigned a low, medium or high risk category under a documented, board-approved method.
- Periodic review: Test that risk categories are reviewed at the frequency RBI requires, with evidence of each review cycle.
- CKYCR uploads: Reconcile new accounts opened with records uploaded to the Central KYC Records Registry and clear backlogs within the prescribed timeline.
For statutory and internal auditors of NBFCs, each of these points can be tested from records: board minutes and RBI approvals for director changes, the risk-categorisation policy and customer master, review logs, and CKYCR upload reports compared with account-opening data.
Updated on 27 September 2026: added the RBI press release, the legal provisions, the inspection reference date and the three specific lapses, and the same-day Progfin penalty; removed general commentary not supported by the order.
