RBI imposes ₹2 cr penalty on SBI, ₹92 lakh on Canara, City Union Bank

The Reserve Bank of India (RBI) imposed a monetary penalty of ₹2 crore on the State Bank of India for the violations of certain provisions of the Banking Regulation Act, 1949. The RBI says the action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

The RBI's statutory inspection revealed that SBI held shares as pledgee exceeding 30% of the paid-up share capital of certain companies and failed to credit the eligible amount to the Depositor Education and Awareness Fund within the stipulated time. After considering the bank’s reply to the notice, the RBI imposed a monetary penalty.

The RBI in September 2023 had also imposed a penalty worth ₹1.30 crore on SBI for non-compliance with its certain directions on ‘Loans and Advances’ and ‘Intra-Group Transactions and Exposures’. The bank had sanctioned a term loan to a corporation to substitute budgetary resources envisaged for certain projects without undertaking due diligence on the viability and bankability of the projects. The repayment of the loan was made out of budgetary resources, the RBI found out.

Amid the development, SBI shares are trading down 0.76% at ₹753.45 on the NSE. The banking heavyweight has dipped 1.26% in the past week; but has risen 20.91% in the past month.

The Reserve Bank of India (RBI) has also imposed a monetary penalty of ₹32.30 lakh on Canara Bank and ₹66.00 lakh on City Union Bank Limited. The monetary penalty has been imposed for the violations of various norms related to the data format for furnishing credit information, resolution framework 2.0, prudential norms on income recognition, asset classification and provisioning about advances and KYC directions.

The RBI says its statutory inspection revealed non-compliance with its directions to the extent that it failed to rectify the rejected data and upload the same with the Credit Information Companies (CICs) within seven days of receipt of such rejection reports from the CICs and restructured certain accounts, which were not standard assets as on March 31, 2021, under the extant directions. After considering the banks' replies, and oral submissions, the RBI imposed monetary penalties on both banks.

Additionally, the RBI also imposed a penalty worth ₹16 lakh on Ocean Capital Market, Rourkela, Odisha for non-compliance with certain provisions of the “Non-Banking Financial Company -- Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016". The RBI probe revealed it delayed the submission of several returns on the XBRL platform, breached exposure limits on lending or investments in respect of single borrowers and single groups of borrowers and didn't constitute many committees of the board.