RBI imposes penalties on Punjab National Bank, Federal Bank

The Reserve Bank of India (RBI) took action on November 3 by announcing monetary penalties against several financial institutions for violating regulations. The penalties were imposed on Punjab National Bank, Federal Bank, Kosamattam Finance, and Mercedes-Benz Financial Services India. The central bank issued these penalties to ensure that financial institutions comply with regulatory requirements.

Penalties and Violations

1. Punjab National Bank (PNB) – Penalty: Rs 72 Lakh

• SMS Charges Violation: PNB imposed SMS charges on certain accounts even though they had invalid mobile numbers in their Core Banking Solution (CBS).
• Interest Rate Schedule: PNB did not strictly adhere to the pre-disclosed interest rate schedule in various term deposit accounts.
• MCLR-Linked Loans: The bank failed to specify the interest reset date in Marginal Cost of Funds Based Lending Rate (MCLR)-linked loans.

2. Federal Bank – Penalty: Rs 30 Lakh

• Demand Drafts Issue: Federal Bank issued demand drafts with a value of rupees fifty thousand and above without including the purchaser’s name on the face of the drafts.

3. Kosamattam Finance – Penalty: Rs 13.38 Lakh

• Loan-to-Value (LTV) Ratio Violation: Kosamattam Finance did not maintain the required Loan-to-Value (LTV) ratio of 75 percent in certain loan accounts during the fiscal year 2021-22.

4. Mercedes-Benz Financial Services India – Penalty: Rs 10 Lakh

• Customer Due Diligence: The company failed to conduct ongoing due diligence of its customers.
• KYC Information Update: Mercedes-Benz Financial Services India did not update the Know Your Customer (KYC) information of its high-risk customers as of March 31, 2021.

Response and Further Action

In response to these violations, the RBI issued notices to the affected financial institutions, advising them to provide reasons for non-compliance with the RBI’s directions. This step was taken to ensure transparency and accountability in the financial sector and to uphold regulatory standards.

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