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The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹1,27,20,000 on Bank of Maharashtra for non-compliance with certain directions issued on Loan System for Delivery of Bank Credit, Cyber Security Framework in Banks, and Know Your Customer (KYC). The penalty has been imposed under the powers conferred by Section 47A(1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949.
Background
The RBI conducted the Statutory Inspection for Supervisory Evaluation (ISE 2023) with reference to the bank’s financial position as of March 31, 2023, along with an IT examination in May 2023. The inspection revealed several instances of non-compliance, prompting RBI to issue a show-cause notice to the bank.
After considering the bank’s written reply, oral submissions during the personal hearing, and additional submissions, RBI found the following charges substantiated:
Failure to ensure that the minimum outstanding loan component met the specified percentage of the sanctioned fund-based working capital limit for certain borrowers Failure to implement a fraud risk management system across all delivery channels Allotment of multiple Customer Identification Codes to certain customers instead of a Unique Customer Identification Code (UCIC) for each customer
Operations allowed in certain small accounts that did not meet regulatory requirements
RBI clarified that this action is based on deficiencies in regulatory compliance and does not affect the validity of any transactions or agreements entered into by the bank with its customers. The imposition of the penalty is without prejudice to any other action RBI may initiate against the bank.
[RBI]