RBI imposes penalty on 14 banks for contravention of various norms

RBI said the banks had failed to comply with provisions of one or more of the aforesaid directions.

In a release Wednesday, the Reserve Bank of India said it has imposed a penalty of ₹145 million on 14 banks for breach of several norms.

The provisions breached include guidelines on ‘Lending to Non-Banking Financial Companies’, ‘Bank Finance to Non-Banking Financial Companies’, ‘Loans and Advances Statutory and Other Restrictions’, ‘Creation of a Central Repository of Large Common Exposures Across Banks’, the circular on ‘Reporting to Central Repository of Information on Large Credits, and ‘Operating Guidelines for Small Finance Banks’.

Further, the fines also pertained to contravention of provisions of Section 19(2) and Section 20 (1) of Banking Regulation Act, 1949, the release said.

Section 19(2) of the Banking Regulation Act, 1949 bars banks from holding shares in any company, whether as pledgee, mortgagee or absolute owner, of an amount exceeding 30% of the paid-up share capital of that company or 30% of its own paid-up share capital and reserves, whichever is less.

Section 20 (1) of the Act prohibits banks from granting loans or advances on the security of its own shares, or entering into any commitment for granting any such loans or advances to or on behalf of:

* Any of its directors

* Any firm in which any of its directors is interested as partner, manager, employee or guarantor,

* Any company (not being a subsidiary of the bank or a company registered under section 25 of the Companies Act, 1956 or a government company) of which any of the directors of the bank is a director, managing agent, manager, employee or guarantor or in which he holds substantial interest

* Any individual in respect of whom any of its directors is a partner or guarantor

The central bank said a scrutiny in the accounts of the companies of a group was carried out, and it was observed that the banks had failed to comply with provisions of one or more of the aforesaid directions.

Following this, 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 or contraventions of the provisions.

The replies received from the banks, oral submissions made in the personal hearings, wherever sought by the banks, and examination of additional submissions, where made, were duly considered, based on which the regulator concluded that imposition of the monetary penalty was warranted, it said.

Karnataka Bank and Punjab & Sind Bank notified the exchanges that they had each been fined 10 mln rupees for breach of norms on lending to non-banking financial companies. While Karnataka Bank claimed the loans pertained to credit given to Infrastructure Leasing & Financial Services Ltd and its group companies, the latter did not name any entity.

The banks fined and the penalty levied on them, is as follows:

Bank Name

Penalty (in₹ million)

Bandhan Bank


Bank of Baroda


Bank of Maharashtra


Central Bank of India


Credit Suisse AG


Indian Bank


IndusInd Bank Ltd


Karnataka Bank Ltd


Karur Vysya Bank Ltd


Punjab and Sind Bank


South Indian Bank Ltd


State Bank of India


The Jammu & Kashmir Bank Ltd


Utkarsh Small Finance Bank Ltd




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