RBI imposes Rs 14.5 crore penalty on 14 banks including SBI, Bank of Baroda; Here's why

Cracking the whip on banks for failing to comply with the directions issued, the Reserve Bank of India (RBI) on Wednesday imposed a monetary penalty on fourteen banks which include prominent institutions such as the State Bank of India, Bank of Baroda and IndusInd Bank Ltd, amongst others. The monetary fine has been imposed as the banks failed to follow the directions issued by the central authority pertaining to the matters of Lending to Non-Banking Financial Companies (NBFCs), Bank Finance to Non-Banking Financial Companies, loans and Advances - Statutory and Other restrictions, and Creation of a Central Repository of Large Common Exposures across banks. The stern action comes after the RBI scrutinized accounts of the companies of a group. 

Issuing a statement on Wednesday, the RBI informed that showcause notices were issued to the aforementioned banks as to why penalty should not be imposed for their non-compliance. Amongst the fourteen banks sanctioned, Bank of Baroda has been slapped with the highest fine of Rs 2 crores followed by Bank of Maharashtra, Central Bank of India, the Jammu & Kashmir Bank Ltd which have been imposed with a penalty of Rs 1 crore each. The State Bank of India has been asked to deposit a fine of Rs 50 lakhs. 

The 14 banks penalised by the RBI are: 

"The replies received from the banks, or the oral submissions made in personal hearings, wherever sought by the banks, and the examination of additional submissions, where made, were duly considered, and to the extent the charges of non-compliance with RBI directions/contraventions of provisions of Banking regulation Act, 1949 were sustained. RBI concluded that it warranted imposition monetary penalty on aforementioned fourteen banks," RBI chief general manager Yogesh Dayal said in a statement on Wednesday. 

RBI Extends Regulatory Restrictions On PMC Bank

Meanwhile last week, the RBI extended the regulatory restrictions on Punjab and Maharashtra Cooperative (PMC) Bank by another six months till December 2021 to enable the completion of its takeover by Centrum Financial Services.

Paving the way for takeover of the crisis-ridden bank, the RBI had earlier in the month granted in-principle approval to Centrum Financial Services to set up a small finance bank (SFB). In September 2019, the RBI had superseded the board of PMC Bank and placed it under regulatory restrictions, including cap on withdrawals by customers, after detection of certain financial irregularities, hiding and misreporting of loans given to real estate developer HDIL. The restrictions have been extended several times since then.