RBI fines SBI, Canara Bank, and City Union Bank almost Rs 3 crore, with SBI facing a Rs 2 crore penalty and Canara Bank fined Rs 32 lakh

RBI Slaps Heavy Fines on SBI, Canara Bank, and City Union Bank for Violating Regulations

The Reserve Bank of India (RBI) has wielded its regulatory authority by imposing significant penalties on prominent banks, including the State Bank of India (SBI) and Canara Bank, along with City Union Bank, highlighting the central bank’s commitment to ensuring strict adherence to regulatory norms in the banking sector.

The most substantial penalty, amounting to Rs 2 crore, has been levied on the State Bank of India (SBI). The punitive action against SBI stems from a regulatory inspection conducted on its financial position as of March 31, 2022. During this inspection, it was uncovered that SBI held shares exceeding thirty percent of the paid-up share capital of specific companies as a pledgee. More critically, SBI failed to credit the eligible amount to the Depositor Education and Awareness Fund within the stipulated time frame. The RBI, after due consideration of SBI’s responses and oral submissions, concluded that the contravention of certain provisions of the Banking Regulation (BR) Act warranted a monetary penalty.

 

In the case of Canara Bank, the RBI imposed a fine of Rs 32.30 lakh, highlighting specific lapses in compliance. Canara Bank faced censure for failing to rectify rejected data promptly and upload it to Credit Information Companies (CICs) within seven days of receiving rejection reports from the CICs. Furthermore, Canara Bank restructured certain accounts that did not meet standard asset criteria as of March 31, 2021, contravening existing directives. This penalty underscores the RBI’s commitment to enforcing stringent standards of compliance across all banking institutions.

City Union Bank Limited found itself in the regulatory crosshairs, receiving a penalty of Rs 66 lakh. This penalty was a consequence of non-compliance with RBI directives on ‘Prudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining to Advances — Divergence in NPA Accounts’ and Know Your Customer Directions. The RBI, in its release, emphasized the importance of adherence to these directives to maintain the integrity of the banking system.

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Additionally, the RBI imposed a Rs 16 lakh penalty on Ocean Capital Market Ltd, Rourkela, Odisha, for non-compliance with certain provisions related to non-banking financial companies (NBFCs). This move reinforces the regulatory oversight exercised by the RBI across different financial entities under its purview.

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It is essential to note that the RBI’s penalties are not intended to pass judgment on the validity of transactions or agreements entered into by the entities with their customers. Instead, they are rooted in the specific deficiencies identified in regulatory compliance frameworks. This enforcement action serves as a crucial reminder for financial institutions to uphold robust regulatory compliance practices, reflecting the central bank’s commitment to maintaining a sound and trustworthy financial ecosystem in India.