Lately, the Reserve Bank of India (RBI) has been taking strict action and undertaking a comprehensive review for violations of various regulatory norms.

Major private entities and banks include Paytm Payments Bank, L&T Finance, TransUnion CIBIL, Equifax, Amazon, Krazybee, CRIF High Mark, and many more.

In 2023, the RBI imposed monetary penalties on eight government banks, adding up to Rs. 12.18 crores.

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Keep reading to find out which government banks were penalized, the fines imposed, and the reasons behind the penalties!

I. Canara Bank 

Penalty imposed: ₹2.92 crores on May 9

Reason for imposing penalty: 

(i) unsuccessful in linking interest on floating rate retail loans and loans to MSME to an external benchmark, as well as on floating rate rupee loans to their Marginal Cost of Lending Rate (MCLR),

(iii) opened savings deposit accounts in the name of entities that were not eligible,

(iv) used fake mobile numbers for various credit card accounts, 

(v) didn’t pay interest on deposits accepted under the daily deposit scheme and prematurely withdrawn within 24 months of the opening of the accounts,

(vi) charged customers for SMS alerts,

(vii) didn’t undertake ongoing customer due diligence and lacked effective software to detect unusual transactions.

II. Indian Overseas Bank

Penalty imposed: ₹2.20 crores on May 29

Reason for imposing penalty:

(i) didn’t transfer the required 25% of disclosed profits for 2020–21 to its reserve funds,

(ii) showed a big difference in Non-Performing Assets (NPA),

(iii) gave interest on deposits of non-individual constituents at rates that were applicable to senior/super senior citizens,

(iv) failed to implement control measures for ATMs, especially encrypting communication between ATM terminal/PC and ATM Switch within the set timelines.

III. Indian Bank

Penalty imposed: ₹1.62 crores on September 21

Reason for imposing penalty:

(1) sanctioned a term loan to a corporation:

(i) instead of using budgeted funds for specific projects;
(ii) without checking if the projects were financially viable; and
(iii) the repayment or servicing of which was made out of budget funds.

(2) didn’t shut down several accounts opened using e-KYC in non-face-to-face mode, even after a year without conducting proper procedures, and

(3) opened some savings accounts for customers who were not eligible to maintain any savings deposit accounts.

Penalty imposed: ₹55.00 lakhs on April 06 

It didn’t follow the required due diligence measures when opening an account in the name of a sole proprietary firm. 

IV. Bank of Maharashtra 

Penalty imposed: ₹1.45 crores on June 22

Reason for imposing the penalty is for non-compliance with certain directions issued by RBI on ‘Loans and Advances – Statutory and Other Restrictions’ and the Advisory on ‘Man in the Middle (MiTM) Attacks in ATMs’ (the Advisory).

V. State Bank of India 

Penalty imposed: ₹1.3 crores on September 21

Reason for imposing the penalty is for non-compliance with some directions issued by the RBI on ‘Loans and Advances – Statutory and Other Restrictions’ and ‘Guidelines on Management of Intra-Group Transactions and Exposures’.

VI. Punjab & Sind Bank

Penalty imposed: ₹1 crores on September 21

Reason for imposing the penalty was that it failed to credit the eligible amount to the Depositor Education and Awareness Fund within the period.

VII. Central Bank of India 

Penalty imposed: ₹84.50 lakhs on May 25

Reason for imposing penalty:

(i) didn’t tell RBI about certain accounts being declared as fraud within 7 days, as decided by the Joint Lenders’ Forum (JLF),

(ii) charged customers for SMS alerts on a flat basis instead of on an actual usage basis.

VIII. Bank of Baroda 

Penalty imposed: ₹30.00 lakhs on January 30

Reason for imposing penalty:

(i) crossed set transaction limits in small accounts.

(ii) didn’t stick to promised interest rates in certain term deposit accounts.

These government banks got penalties from RBI for not following these rules, and even the big private sector banks, including Axis Bank, HDFC, Punjab National Bank, ICICI Bank, Kotak Mahindra Bank, Bajaj Finance, RBL Bank and others, faced similar actions.

Written By Shivani Singh

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