RBI Imposes Rs 1.3 Crore Penalty On SBI; Fines Punjab & Sind Bank, Indian Bank Too For Non-Compliance

The Reserve Bank of India (RBI) has imposed monetary penalties in the range of Rs 1 crore to less than Rs 2 crore on three public sector lenders. These are the State Bank of India (SBI), Punjab & Sind Bank (PSB), and Indian Bank. The PSU banks are penalised for non-compliance with the central bank's guidelines. Notably, the stocks will also be in focus on Tuesday.

RBI penalised SBI and Indian Bank for non-compliance in loans and advances directions, while it fined PSB for non-compliance in the 'Depositor Education and Awareness Fund Scheme'.

It needs to be noted that these banks were issued notices before the penalty to hear their reasonings for not meeting guidelines. After they replied to the notice and oral submissions, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted the imposition of monetary penalty on the bank.

Here's what you need to know:

SBI:

To the largest public sector bank in India, RBI imposed a monetary penalty of Rs 1.30 crore for non-compliance with certain directions issued by RBI on 'Loans and Advances - Statutory and Other Restrictions.

RBI carried statutory Inspection for Supervisory Evaluation of the bank concerning its financial position as of March 31, 2021.

The central bank found out SBI's non-compliance on two occasions. Firstly, the bank sanctioned a term loan to a Corporation (i) in lieu of or to substitute budgetary resources envisaged for certain projects; (ii) 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 obligations; and (iii) the repayment/servicing of which was made out of budgetary resources.

Secondly, the bank failed to adhere to the intra-group exposure limit, as it did not consider the intra-day limit sanctioned to its group entity for the purpose of computing the intra-group exposure limit.

Indian Bank:

RBI imposed a penalty of Rs 1.62 crore on the Indian Bank for non-compliance with certain directions issued by RBI on 'Loans and Advances - Statutory and Other Restrictions.

In the case of Indian Bank as well, RBI carried Statutory Inspection for Supervisory Evaluation with reference to the bank's financial position as of March 31, 2021.

After the inspection, RBI observed that the Indian Bank had a similar situation to SBI in the first case where it sanctioned a term loan to a corporation. However, Indian Bank was also found in non-compliance with the directions where it allowed operations and did not close several accounts opened using OTP-based e-KYC in non-face-to-face mode, even after the expiry of one year without conducting customer due diligence procedure.

Also, Indian Bank opened several savings accounts in the names of customers not eligible to maintain savings deposit accounts -- which further was non-compliant as per RBI.

Punjab & Sind Bank:

Compared to the above two PSU banks, Punjab & Sind Bank has received a monetary penalty of Rs 1 crore only for non-compliance with directions issued by RBI on 'The Depositor Education and Awareness Fund Scheme, 2014-Section 26A of Banking Regulation Act, 1949-Operational Guidelines'.

After carrying out an inspection, RBI found out that the bank failed to credit the eligible amount to the Depositor Education and Awareness Fund within the period prescribed under Section 26A of the BR Act.