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The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹1.62 crore (Rupees One Crore and Sixty Two Lakh only) on Indian Bank for non-compliance with certain regulatory directions related to Loans and Advances – Statutory and Other Restrictions, Know Your Customer (KYC) Directions, 2016, and Interest Rate on Deposits Directions, 2016. The penalty has been levied under the provisions of Section 47 A (1) (c) read with Sections 46 (4) (i) and 51(1) of the Banking Regulation Act, 1949.
The RBI’s action follows a Statutory Inspection for Supervisory Evaluation (ISE 2021) conducted with reference to the bank’s financial position as on March 31, 2021. The inspection revealed multiple regulatory lapses, including:
Sanctioning a term loan to a Corporation without adequate due diligence on project viability and repayment capability, with repayments being made from budgetary resources rather than project revenue. Failure to close accounts opened using OTP-based e-KYC in non-face-to-face mode, even after one year, without conducting proper customer due diligence. Opening savings accounts for customers not eligible to maintain such accounts.
Following these findings, the RBI issued a notice to the bank to show cause why a penalty should not be imposed. After considering the bank’s written response and oral submissions during the personal hearing, RBI concluded that the non-compliance was substantiated and warranted the monetary penalty.
The RBI clarified that this action is based solely on regulatory deficiencies and does not comment on the validity of any transaction or agreement entered into by the bank with its customers.
[RBI]