RBI imposes ₹2.27 cr penalty on RBL Bank; 4 others fined

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹2.27 crore on RBL Bank Limited for non-compliance with certain provisions of the directions. According to the RBI, the action is based on the deficiencies in "regulatory compliance" observed relating to the period FY 2018-19 to FY 2021-22.

The central bank says the violations pertain to ‘Internal Ombudsman Scheme, 2018’, ‘Fair Practices Code for Lenders’, ‘Credit Card Operations of Banks’, ‘Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks’ and ‘Recovery Agents engaged by Banks’.

The RBI said an examination of certain complaints revealed the bank failed to communicate the decision of its Internal Ombudsman (IO) properly. It also failed to ensure the recovery agents engaged in debt collection efforts did not resort to "intimidation or harassment" of any kind.

Additionally, it did not ensure that recovery agents engaged by the bank either directly or through recovery agencies had completed training courses for Direct Recovery Agents and obtained a relevant certificate before being onboarded (FY 2018-19 to FY 2021-22).

The bank also failed in ensuring that pre-employment police verification was carried out for recovery agents engaged by it and also did not inform borrowers of the details of the recovery agency, at the time of forwarding their cases to the recovery agency.

"After considering the bank’s reply to the notice, oral submissions made during the personal hearing and additional submissions made by it, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty on the bank, to the extent of non-compliance with such directions," said the central bank.

The RBI also imposed a monetary penalty of ₹4 lakh on Smriti Nagrik Sahakari Bank Maryadit, Mandsaur, (Madhya Pradesh) for the violation of non-compliance with directions issued by RBI on exposure norms and statutory/other restrictions on UCBs and Know Your Customer (KYC).

"This action is based on 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," said the apex bank.

The RBI said the inspection reports of the bank based on its financial position as on March 31, 2020, and March 31, 2021, revealed the bank had "sanctioned loans beyond the prescribed ceiling to nominal members"; no system of periodical review of risk categorisation of customers; had not done periodic updation of KYC of its customers as per risk categorisation; and no system to generate alerts for monitoring and reporting suspicious transactions in contravention of/non-compliance with the aforesaid directions issued by RBI.

The RBI also imposed a monetary penalty of ₹3 lakh on Lokmangal Co-operative Bank Ltd., Solapur, for the violation of non-adherence with the directions to urban co-operative banks on exposure norms and statutory/other restrictions-UCBs.

Additionally, the central bank also imposed a monetary penalty of ₹2 lakh on the Noble Co-operative Bank Ltd., Noida, for the violation of the contravention of Section 35 A read with Section 56 of the Banking Regulation Act, 1949. Also, ₹1.00 lakh penalty was imposed on Imperial Urban Co-operative Bank Ltd., Jalandhar, Punjab, for violation of Section 35A read with Section 56 of the Banking Regulation Act, 1949.