RBI has penalised 14 banks including Bandhan Bank, Bank of Baroda and State Bank of India (SBI) for multiple rule violations.
This is a record number of banks fined by the regulator on a single day.
Who Is Involved?
Those accused include public sector, private, foreign, and co-operative banks.
The banks involved comprise
- Bank of Maharashtra
- Central Bank of India
- Credit Suisse
- Indian Bank
- IndusInd Bank
- Karnataka Bank
- Karur Vysya Bank
- Punjab and Sind Bank
- South Indian Bank
- Jammu and Kashmir Bank
- Utkarsh Small Finance Bank.
The Offenses
They have been accused of flouting rules issued by RBI regarding Lending to Non-Banking Financial Companies (NBFCs)’ ‘Bank Finance to Non-Banking Financial Companies (NBFCs)’ and ‘Loans and Advances – Statutory and Other Restrictions’.
Other allegations include failure to comply with restrictions and provisions on loans and as well as advances and reporting to the central database on large exposures.
Investigation
The penalties are imposed after scrutinising the banks’ dealings with crisis-ridden Dewan Housing Finance Corporation (DHFL) and its group companies.
RBI had investigated the accounts of the companies of DHFL which revealed that the banks had not complied with its provisions under the Banking Regulation Act, 1949.
Notices were also issued directing banks to defend themselves in a show cause as to why they shouldn’t be penalised.
RBI examined the same and maintained its stance that the 14 banks violated norms which calls for imposition of monetary penalty.
Quantum Of Fines
The total amount of penalty imposed is Rs 14.50 crore.
Bank of Baroda has been fined Rs 2 crore, the highest, and SBI Rs 50 lakh, the lowest.
All the following have been levied a fine of Rs 1 crore each:
- Central Bank of India
- IndusInd Bank
- Credit Suisse AG
- Bandhan Bank
- Indian Bank
- Bank of Maharashtra
- Utkarsh Small Finance Bank
- Karur Vysya Bank
- Karnataka Bank
- South Indian Bank
- Punjab and Sind Bank
- Jammu & Kashmir Bank
Customers Need Not Worry
RBI also assured customers of the banks, saying “[the ruling] is not intended to pronounce upon the validity of any transaction or agreement entered into by the banks.”
The fines will not impact the banks’ customers as the penalties were issued due to lack of regulatory compliance.