The Reserve Bank of India (RBI) has announced the imposition of monetary penalties on three state-owned banks, namely State Bank of India (SBI), Punjab & Sind Bank, and Indian Bank, for their respective violations of regulatory norms.
Penalty on State Bank of India (SBI):
The RBI has levied a monetary penalty of ₹1.30 Crore (Rupees One Crore and Thirty Lakh only) on State Bank of India (SBI). This penalty has been imposed for non-compliance with certain directives issued by the RBI related to ‘Loans and Advances – Statutory and Other Restrictions’ and ‘Guidelines on Management of Intra-Group Transactions and Exposures.’ The penalty has been imposed under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949.
The RBI’s examination of the Risk Assessment Report/Inspection Report for the year 2021, along with related correspondence, revealed non-compliance by SBI in several areas. These include sanctioning a term loan to a corporation in place of budgetary resources for specific projects, failing to conduct due diligence on the viability of projects, and not adhering to intra-group exposure limits. Despite a notice issued to SBI to explain the non-compliance, the RBI found the charges to be substantiated, leading to the imposition of the monetary penalty.
Penalty on Punjab & Sind Bank:
The RBI has imposed a monetary penalty of ₹1.00 crore (Rupees One crore only) on Punjab & Sind Bank. This penalty is related to non-compliance with the provisions of sub-section (2) of Section 26A of the Banking Regulation Act, 1949, along with RBI directions on ‘The Depositor Education and Awareness Fund Scheme, 2014-Section 26A of Banking Regulation Act, 1949-Operational Guidelines.’ The penalty has been imposed under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act.
The RBI’s action is based on deficiencies in regulatory compliance and does not pass judgment on the validity of transactions or agreements with customers. The examination of the Risk Assessment Report/Inspection Report pertaining to 2021 revealed non-compliance by Punjab & Sind Bank regarding the crediting of eligible amounts to the Depositor Education and Awareness Fund within the prescribed period. The bank was issued a notice to show cause for its non-compliance, and after considering the bank’s response, the RBI concluded that the charges of non-compliance were substantiated, leading to the imposition of the monetary penalty.
Penalty on Indian Bank:
The RBI has imposed a monetary penalty of ₹1.62 crore (Rupees One Crore and Sixty-Two Lakh only) on Indian Bank. This penalty is related to non-compliance with various RBI directives, including those pertaining to ‘Loans and Advances – Statutory and Other Restrictions,’ ‘Reserve Bank of India [Know Your Customer (KYC)] Directions, 2016,’ and ‘Reserve Bank of India (Interest Rate on Deposits) Directions, 2016.’ The penalty has been imposed under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949.
Indian Bank’s non-compliance with these directions led to the imposition of the monetary penalty. The RBI’s order specifies that the penalty is based on its powers under the aforementioned sections of the Banking Regulation Act.
These actions by the RBI underscore the importance of banks adhering to regulatory norms and directives to maintain the integrity and stability of the banking sector. The penalties imposed serve as a reminder to financial institutions to ensure strict compliance with all regulatory requirements.
