The Reserve Bank of India (RBI) has taken a stern stance on non-compliance with its regulatory directives by imposing penalties on Union Bank of India, RBL Bank, and Bajaj Finance, all of which have faced penalties for various breaches of RBI’s regulatory guidelines.
Union Bank of India Penalized for Non-Compliance with ‘Loans and Advances’ Directives
- The RBI has imposed a penalty of ₹1 crore on Union Bank of India for its failure to adhere to the regulatory guidelines on ‘Loans and Advances – Statutory and Other Restrictions.’
- An examination of the bank’s financials for the fiscal year 2020-21 revealed significant non-compliance issues.
- The bank sanctioned a term loan to a corporation in lieu of budgetary resources designated for specific projects, without conducting due diligence on the viability of these projects.
- Furthermore, the repayment and servicing of the loan were made using budgetary resources, a direct violation of the central bank’s directives.
RBL Bank Fined for Violating Norms on Regulatory Approval
- RBL Bank has been fined an amount of ₹64 lakh for its failure to comply with RBI’s regulatory approval norms concerning the acquisition of shares or voting rights in private sector banks.
- The bank did not obtain the annual declaration in Form B from one of its major shareholders within one month of the close of the financial years 2018, 2019, and 2020.
- Additionally, RBL Bank failed to furnish certificates to the RBI regarding the ‘fit and proper‘ status of one of its major shareholders by the end of September for all three years.
Bajaj Finance Penalized for Breach of Regulatory Norms
- Pune-based Bajaj Finance has also been levied a penalty of ₹8.50 lakh for breaching regulatory norms related to the reporting of certain frauds to the RBI.
- The violation pertains to the extent of not reporting and delays in reporting specific fraud cases to the central bank.
- Adherence to timely and accurate reporting of financial irregularities is vital for maintaining the integrity and stability of the financial system.
Importance of Regulatory Compliance and Lessons from RBI’s Actions
The RBI’s actions serve as a reminder to financial institutions about the need to follow best practices and uphold the highest standards of governance and transparency in their operations. It is imperative for banks and financial institutions to review and enhance their compliance mechanisms to prevent future breaches and penalties.
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