RBI Imposes Penalties on Shri Ram Finance Corp and Progfin Over Governance and KYC Lapses

Executive Summary

The Reserve Bank of India (RBI) has issued monetary penalties against two non-banking financial companies (NBFCs)—Shri Ram Finance Corporation Private Limited (₹8.10 lakh) and Progfin Private Limited (₹2.70 lakh)—for non-compliance with central bank directions governing Corporate Governance and Know Your Customer (KYC) frameworks.

The enforcement orders were issued under Section 58G(1)(b) read with Section 58B(5)(aa) of the Reserve Bank of India Act, 1934, following statutory supervisory inspections with reference to the entities' financial positions as of March 31, 2025.

Detailed Breakdown of Sustained Violations

1. Shri Ram Finance Corporation Private Limited (Penalty: ₹8.10 Lakh)

• Unapproved Board Changes (>30% Rule): The company failed to obtain prior written permission from the RBI prior to appointing a director that resulted in a change in management, caused by a turnover of more than 30% of its directors (excluding independent directors).
• Absence of Customer Risk Profiling: The entity failed to establish an operational system to categorize its customer accounts into low, medium, and high-risk tiers.
• Central KYC Registry Delays: The lender failed to upload customer KYC records onto the Central KYC Records Registry (CKYCR) within the mandated statutory timelines.