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The Reserve Bank of India (RBI) has announced monetary penalties against Union Bank of India and RBL Bank for non-compliance with regulatory guidelines and rule violations.
A penalty of Rs 1 crore has been imposed on Union Bank of India for its failure to adhere to specific directions from the RBI. The bank sanctioned a term loan to a corporation as a substitute for budgetary resources designated for certain projects. However, it did not conduct due diligence on the feasibility and bankability of these projects to ensure that their revenue streams could sufficiently cover debt servicing obligations. This led to repayment and servicing being funded by budgetary resources.
On the other hand, RBL Bank has been fined Rs 64 lakh due to its failure to obtain the annual declaration in Form B from one of its major shareholders within one month of the close of the three financial years ending on March 31, 2018, March 31, 2019, and March 31, 2020. The bank also did not provide certificates to the RBI regarding the continued ‘fit and proper’ status of one of its major shareholders by the end of September for these three financial years.
The RBI clarified that the monetary penalties were imposed based on deficiencies in regulatory compliance and were not intended to judge the validity of any transactions or agreements entered into by the banks with their customers. Following the imposition of the penalty, the RBI issued a notice to each bank, urging them to show cause as to why the penalty should not be enforced for non-compliance with the regulatory directives.
After reviewing the responses and considering oral submissions made during personal hearings, the RBI concluded that the charges of non-compliance with the aforementioned RBI directions were substantiated, justifying the imposition of monetary penalties on the banks.
These penalties underscore the RBI’s commitment to upholding regulatory standards and ensuring that banks comply with the prescribed rules and regulations to maintain the integrity and stability of the banking sector.
Sources By Agencies
