UPDATED – Multiple Indian Banks Penalised for Rule Violations

The RBI has announced penalties on 17 banks in total, the majority related to non-compliance with RBI directions on the monitoring the end use of loan funds. 

14-15 February 2019 – RBI announced more penalties in two additional notices.

The RBI (Reserve Bank of India) on Tuesday (12 February) announced penalties on multiple banks for violations of various banking norms.

A penalty of INR 15 million (USD 210,000) has been imposed on Allahabad Bank, Bank of Maharashtra and Indian Overseas Bank for non-compliance with various RBI directions on monitoring the end use of funds, exchanging of information with other banks, classifying and reporting of frauds, and restructuring of accounts, the RBI said in a 12 February notice. In the same notice, the RBI announced a INR 10 million on Andhra Bank for similar violations.

A day later (13 February), the RBI announced penalties on four more banks for non-compliance with the same RBI directions. Bank of Baroda, State Bank of India, and Union Bank of India have been fined INR 10 million, while Corporation Bank was fined INR 20 million.

Another day later (14 February), three more bank penalties were announced for similar failures – INR 15 million for Oriental Bank of Commerce, and INR 10 million each for Bank of India and Punjab National Bank.

The RBI prescribes strict rules on the use of loan proceeds by borrowers, and has on numerous occasions asked banks to monitor this end use closely to ensure funds are not diverted for purposes other than what is specified to obtain the loans.

Meanwhile, a separate 12 February notice says a INR 2 million penalty has also been imposed on three other banks – HDFC Bank, IDBI Bank and Kotak Mahindra Bank – for non-compliance with KYC (know your customer) and AML (anti-money laundering) standards.

Last week (5 February), the RBI also imposed a INR 20 million penalty on Axis Bank and UCO Bank for non-compliance of norms related to cheque payments. A further INR 2 million fine was imposed on Axis Bank for contravening directions related to the detection and impounding of counterfeit notes, and a INR 10 million penalty was levied on Syndicate Bank for failures related to fraud risk management.

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