RBI Imposes ₹29.6 Lakh Penalty on Fino Payments Bank for Regulatory Lapses

In a significant regulatory action, the Reserve Bank of India (RBI) on Friday announced a monetary penalty of ₹29.6 lakh on Fino Payments Bank Limited. The penalty has been levied for non-compliance with certain provisions of the guidelines on the Licensing of Payments Banks, which were detected during a recent inspection by the central bank.

Background: Inspection Reveals Violations

The action followed a Statutory Inspection for Supervisory Evaluation (ISE 2024), conducted by the RBI to assess the operational and regulatory performance of Fino Payments Bank as of March 31, 2024.

During the inspection, the RBI observed that the bank had breached key regulatory norms, specifically related to the end-of-day balance ceiling mandated for Payments Banks.

Nature of Violation: Breach of Balance Limits

According to the RBI, Fino Payments Bank allowed end-of-day balances in certain customer accounts to exceed the regulatory limit, and this breach occurred on multiple occasions.

As per RBI norms, Payments Banks are allowed to accept deposits only up to a prescribed limit per individual customer, to mitigate systemic risk and maintain their restricted banking model. Exceeding this limit is a direct violation of licensing conditions.

Regulatory Process Followed

After the irregularities were identified:

• The RBI issued a notice to Fino Payments Bank, seeking an explanation as to why a monetary penalty should not be imposed for the lapses.

• The bank submitted a written response and also made oral representations during a personal hearing.

Despite these clarifications, the RBI concluded that the bank had indeed failed to comply with its licensing conditions and proceeded with the penalty.

Clarification on Customer Impact

The RBI emphasized that the penalty was imposed purely on regulatory grounds. It does not affect the validity of any transactions or agreements made by Fino Payments Bank with its customers.

This distinction is important as it assures customers that the penalty does not imply any wrongdoing in their dealings with the bank, but rather reflects institutional-level compliance failures.