The Reserve Bank of India (RBI), on September 25, 2023, announced that it imposed penalties on three major banks in the country, including the State Bank Of India, Indian Bank, and Punjab & Sind Bank. The penalties are imposed for regulatory violations, signalling its commitment to upholding banking standards and protecting consumers.
The nation's largest lender has been penalised with a fine of Rs 1.30 crore for non-compliance with specific directions on 'Loans and Advances – Statutory and Other Restrictions' and 'Guidelines on Management of Intra-Group Transactions and Exposures'.
RBI noted that this action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.
RBI's statutory examination in 2021 revealed several lapses by SBI. They include:
SBI granted a term loan to a corporation without adequately assessing the viability and bankability of the projects for which the loan was sanctioned. Further, the loan was approved in lieu of or to substitute budgetary resources envisaged for certain projects. The loan was given "without undertaking due diligence on the viability and bankability of the projects to ensure that revenue streams from the projects were sufficient to take care of the debt servicing obligation," RBI said. Furthermore, the repayment of this loan was made using budgetary resources, contrary to regulatory guidelines.
SBI failed to adhere to the intra-group exposure limit, as it did not consider the intra-day limit sanctioned to its group entity to compute the intra-group exposure limit. RBI mandates banks to keep an arm's length when dealing with their group companies and has laid limits on exposure to these companies.
The central bank imposed a penalty of Rs 1.62 crore on the Indian Bank for similar regulatory violations. RBI made all the similar charges also on Indian Bank, and in addition, found these following lapses.
Non-Compliance with e-KYC Regulations: Indian Bank allowed operation in several accounts that were opened using OTP-based e-KYC in a non-face-to-face mode even after the expiry of one year without conducting customer due diligence procedures.
Non-Compliance with Savings Accounts Guidelines: The bank also opened several savings accounts in the name of customers who were not eligible to maintain savings deposit accounts.
The central bank imposed a monetary penalty of Rs 1 crore for non-compliance with the Banking Regulation Act, 1949 provisions on 'The Depositor Education and Awareness Fund Scheme guidelines.
RBI found the bank failed to credit the eligible amount to the Depositor Education and Awareness Fund within the period prescribed under the Banking Regulation Act. According to RBI regulations, banks must identify accounts with no customer-initiated transactions for over 10 years and transfer the credit balance in such accounts to the Depositors Education and Awareness Fund (DEAF).