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RBI Penalizes 5 Banks, including PNB for Regulatory Non-Compliance

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RBI penalizes five banks, including PNB, for regulatory non-complianceOn 5th July 2024, the Reserve Bank of India (RBI) announced that it has penalized 5 banks, including Punjab National Bank (PNB), in the circular issued in the 1st week of July for non-compliance with various RBI directions.

  • Before PNB, 4 other banks which were penalized by RBI: Gujarat Rajya Karmachari Co-operative Bank(Rs 7.50 lakh penalty) Ahmedabad (Gujarat), Rohika Central Co-operative Bank (Rs 1.50 lakh penalty), Madhubani, Bihar; National Co-operative Bank(Rs 2 lakh penalty) Mumbai, Maharashtra; and Bank Employees’ Co-operative Bank(Rs 1 lakh penalty) Kolkata,West Bengal(WB).

Key Points:

i.RBI in exercise of powers given under the provisions of section 47 A (1) (c) read with sections 46 (4) (i) and section 51 (1) of the Banking Regulation Act, 1949 has imposed a monetary penalty of Rs 1.31 crore on PNB. Thus, PNB became the 5th bank to be penalized.

ii.The penalty imposed on PNB was for non-compliance with RBI directions regarding “Loans and Advances: Statutory and Other Restrictions” and the Reserve Bank of India (Know Your Customer (KYC) Direction, 2016)”.

Reasons behind Penalty on PNB:

i.As on 31st March, 2024, the RBI conducted the Statutory Inspection for Supervisory Evaluation (ISE 2022) of the bank with reference to its financial position as on March 31, 2022.

  • Later, RBI issued notice to the bank based on supervisory findings of non-compliance with RBI directions and related correspondence.

ii.During its inspection, RBI found that PNB had sanctioned working capital demand loans to two state government-owned corporations against amounts receivable from the government by way of subsidies, refunds or reimbursements.

  • Also, PNB failed to preserve records related to identification of customers and their addresses obtained during business relationships in certain accounts.

RBI Imposed Penalty on YES Bank for Not Exchanging Mutilated Notes

On 5th July 2024, the Reserve Bank of India (RBI) imposed a monetary penalty of Rs 10,000 on YES Bank for not exchanging mutilated notes.

  • RBI sent its official letter to YES Bank, noted that during the visit by an RBI official found non-exchange of mutilated notes at one of the branches of the bank.
  • As per RBI, the bank was charged a penalty citing the “Scheme of Penalties for bank branches including Currency Chests” based on the bank’s performance in providing customer service to the members of the public.

RBI Cancelled Licence for Karnataka-based Shimsha Sahakara Bank Niyamitha

The Reserve Bank of India (RBI) announced that it has cancelled the licence of Maddur (Karnataka)-based Shimsha Sahakara Bank Niyamitha due to its worsening financial position.

  • As a result, the bank is not entitled to carry on any banking business activity, with effect from the close of business on 5th July, 2024.
  • The Registrar of Cooperative Societies, Karnataka has also been requested to issue an order for closing the bank and appoint a liquidator for the bank.

Note: Every depositor would be entitled to receive deposit insurance claim amount of his or her deposits up to Rs 5 lakh from Deposit Insurance and Credit Guarantee Corporation (DICGC), upon liquidation.

About Reserve Bank of India(RBI):
Governor Shaktikanta Das(25th Governor of RBI)
Headquarter Mumbai, Maharashtra
Established- 1 April, 1935