RBI thrusts penalties on 14 banks for various rule violations

On July 7th the Reserve Bank of India (RBI) imposed monetary penalties on 14 banks including Bandhan Bank, Bank of Baroda and State Bank of India (SBI) for various rule violations. These 14 banks include public sector banks, private banks, foreign banks, Co-operative banks and one small finance bank.

According to the RBI, the violations include non-compliance with certain provisions of directions issued by RBI on ‘Lending to Non-Banking Financial Companies (NBFCs)’ ‘Bank Finance to Non-Banking Financial Companies (NBFCs)’ and ‘Loans and Advances - Statutory and Other Restrictions’.

This is probably the highest number of banks receiving RBI monetary penalties on a single day for various rule violations. According to an industry source, the RBI penalties on these banks are mainly linked to banks' dealings with crisis-ridden Dewan Housing Finance Corporation (DHFL) and its group companies.

The RBI release said a scrutiny in the accounts of the companies of a group was carried out by the RBI and it was subsequently observed that the banks had failed to comply with provisions of one or more of the aforesaid directions issued by RBI and/or contravened provisions of the Banking Regulation Act, 1949, the RBI said. The group mentioned here is mainly DHFL.

Further, notices were issued to the banks advising them to show cause as to why penalty should not be imposed for non-compliance with the directions/contraventions of provisions of Banking Regulation Act, 1949, the RBI said. Following its examination, the RBI concluded that violations warrant imposition of monetary penalty on fourteen banks, the RBI said.