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The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹1.45 crore on Bank of Maharashtra for non-compliance with directions on ‘Loans and Advances – Statutory and Other Restrictions’ and the Advisory on ‘Man in the Middle (MiTM) Attacks in ATMs’.
The penalty was imposed under the provisions of Section 47A (1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949, following RBI’s supervisory evaluation. The central bank clarified that this action is based on regulatory deficiencies and is not intended to question the validity of any transactions or agreements entered into by the bank with its customers.
RBI’s Statutory Inspection for Supervisory Evaluation (ISE 2021), conducted with reference to the bank’s financial position as on March 31, 2021, revealed multiple non-compliances:
The bank sanctioned a term loan to a corporation without adequate due diligence on project viability and repayment capacity, and in lieu of or to substitute budgetary resources for certain projects.
It failed to implement end-to-end encryption controls for ATMs within the prescribed timeline, exposing customers to potential Man-in-the-Middle (MiTM) attacks.
Following the inspection, RBI issued two show-cause notices to the bank. After considering the bank’s written and oral submissions, RBI concluded that the charges were substantiated and warranted the imposition of the penalty.
[RBI]