Document title: RBI imposes monetary penalty on Five Star Business Finance Limited
Issuing authority: Reserve Bank of India
Reference: Press Release 2026-2027/501
Date: 18 June 2026
Regulatory and Policy Measures
The Reserve Bank of India, exercising powers under Section 58G(1)(b) read with Section 58B(5)(aa) of the RBI Act, 1934, issued an order on 18 June 2026 imposing a monetary penalty of ₹6.20 lakh on Five Star Business Finance Limited. The penalty arises from the company’s non‑compliance with the RBI’s Know Your Customer (KYC) Directions and the Fair Practice Code. A statutory inspection was carried out with reference to the company’s financial position as on 31 March 2025. Following a show‑cause notice and a personal hearing, the RBI sustained two charges: (i) the absence of a robust software system for effective identification and reporting of suspicious transactions; and (ii) failure to disclose the methodology for risk gradation and the rationale for charging different interest rates to different borrower categories in application forms and sanction letters. The RBI clarified that the penalty does not comment on the validity of any specific transaction or agreement with customers and is without prejudice to any further action that may be initiated against the company.
Chief General Manager Brij Raj signed the press release.
The RBI’s action underscores strict enforcement of KYC and fair‑practice requirements for non‑banking financial companies, signalling that deficiencies in transaction monitoring and risk‑based pricing disclosures will attract monetary penalties and possible further regulatory measures.