Reserve Bank of India Imposes Penalties on banks for norm violation

Authored By – Isha Vyas (Intern at Legal Soch Foundation)

The news deals with the situation in which Reserve Bank of India (RBI) has imposed penalties on State Bank of India (SBI), Indian Bank, Punjab and Sind Bank, for violating norms.

Keywords : Penalty, Loans, Debts.

The Reserve Bank of India (RBI) has recently taken punitive steps and imposed penalties on three owned banks, including the State Bank of India (SBI), Indian Bank, Punjab and Sind Bank, and Fedbank Financial Services, for violating the norms.

The Reserve Bank has imposed penalties totaling a significant sum of Rs 1.3 crore on the State Bank of India (SBI), Rs 1.62 crore on the Indian Bank, Rs 1 crore on Punjab and Sindh Bank, and Rs 8.80 lakh on Fedbank and Financial Services.

Starting with the State Bank of India (SBI), a fine was imposed on it because of their negligence in managing and lending money, which was played on their part. SBI sanctioned a loan to the company, and the company subsequently misused the government’s money to pay off their private debt, which was strictly not allowed. Additionally, the State Bank of India did not even follow the rules for loans between companies in the same group.

Similarly, Indian Bank was also penalised for not closing several accounts that were created by customers using OTP-based e-KYC procedures in a virtual mode and were not in use anymore. Additionally,  several savings accounts were created for customers who were not eligible to maintain their savings deposit accounts.

Similarly, Punjab and Sind Bank were also imposed a fine for failing to credit the prescribed amount to the Depositor Education and Awareness Fund within the allotted time period, which is prescribed under Section 26A of the Banking Regulation Act. Thus, this resulted in the imposition of the penalty on the bank.

Lastly, Fedbank Financial Service had been negligent in reporting a fraudulent incident to the Reserve Bank of India (RBI), as it raised a question about safeguarding the financial system and eventually resulted in incurring a huge penalty.

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