The Reserve Bank of India recently issued an order on July 3, 2024, which penalised Punjab National Bank an amount INR 1,31,80,000 (Rupees One crore thirty one lakh eighty thousand only) for failing to comply with the RBI’s guidelines on “Loans and Advances – Statutory and Other Restrictions” and “Reserve Bank of India (Know Your Customer (KYC) Direction, 2016.”
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Why RBI imposed Penalty?
The bank neglected to keep records on certain accounts that included customer identification and addresses that were acquired over the course of business relationships. Moreover, the bank approved working capital demand loans to two State Government-owned corporations against amounts owed to the government in the form of subsidies, refunds, and reimbursements.
Inspection by RBI
The RBI carried out the bank’s Statutory Inspection for Supervisory Evaluation (ISE 2022) in relation to its financial status as of March 31, 2022. In light of regulatory observations regarding violations with RBI directives and relevant correspondence, the bank was served with a notice requesting it provide justification for why it shouldn’t be penalized for not following the instructions.
The RBI concluded, among other things, that the bank was guilty of the following offenses, which called for the imposition of a monetary penalty, after taking into account the bank’s response to the notice and oral representations made during the in-person hearing.
Four more banks penalised
In the execution of its authority granted by section 47 A (1) (c) read with sections 46 (4) (i) and section 51(1) of the Banking Regulation Act, 1949, the RBI has levied this penalty. The Reserve Bank of India (RBI) fined Punjab National Bank (PNB) and four other banks during the first week of July for failing to follow several RBI directives.
The four banks that received fines from the RBI were the Bank Employees’ Co-operative Bank in West Bengal; the National Co-operative Bank in Mumbai, Maharashtra; the Rohika Central Co-operative Bank in Madhubani, Bihar; and the Gujarat Rajya Karmachari Co-operative Bank in Gujarat.
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RBI stated that the action is based on regulatory compliance violations and is not meant to rule on the legality of any agreements or transactions the bank has made with its clients. Furthermore, the issue of a monetary penalty does not preclude the RBI from taking further action against the bank.
About the Author
Ms Manasi Gawali is an economics graduate from St. Xavier’s College, Mumbai. She is passionate about economics and finance. She enjoys research, writing poems, music, and travel.
