RBI imposes penalty worth ₹4.7 cr on SBI, 3 others; cancels Kapol Co-operative Bank licence

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹1.30 crore on the State Bank of India (SBI) for non-compliance with its certain directions on ‘Loans and Advances – Statutory and Other Restrictions’ and ‘Guidelines on Management of Intra-Group Transactions and Exposures’.

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 statutory inspection for supervisory evaluation of the bank was conducted on March 31, 2021. The examination of the risk assessment report revealed non-compliance with certain directions.

The bank 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.

It also failed to adhere to the intra-group exposure limit, as it did not consider the intra-day limit sanctioned to its group entity for the purpose of computing the intra-group exposure limit.

The central bank also imposed ₹1.62 crore penalty on Indian Bank for non-compliance with certain directions on ‘Loans and Advances – Statutory and Other Restrictions’, ‘Reserve Bank of India [Know Your Customer (KYC)] Directions, 2016’ and ‘Reserve Bank of India (Interest Rate on Deposits) Directions, 2016’.

The RBI in its order says during its probe it found the bank sanctioned a term loan to a corporation to substitute budgetary resources envisaged for certain projects without undertaking due diligence and that servicing of which was made out of budgetary resources. It also allowed operations and not closed several accounts opened using OTP-based e-KYC in non-face-to-face mode, even after the expiry of one year without conducting customer due diligence procedure. The bank is also accused of opening several savings accounts in the names of customers not eligible to maintain savings deposit accounts.

The central bank says it imposed ₹1 crore penalty on Punjab & Sind Bank for non-compliance with the provisions of sub-section (2) of Section 26A of the Banking Regulation Act, 1949 (BR Act). The RBI probe revealed the bank failed to credit an eligible amount to the Depositor Education and Awareness Fund in the prescribed period.

The RBI also imposed ₹8.80 lakh fine on Fedbank Financial Services Ltd (the company) for non-compliance with certain provisions of the Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016. The statutory inspection of the company showed non-compliance with certain RBI directions. The RBI found it reported a fraud to RBI with delay.

Besides, the RBI also cancelled the licence of The Kapol Co-operative Bank Limited, Mumbai. The RBI says the bank ceases to carry on banking business with effect from the close of business on September 25, 2023.

The licence was cancelled as the bank does not have adequate capital and earning prospects. The continuance of the bank is prejudicial to the interests of its depositors, says the RBI, adding that with its present financial position, it'll be unable to pay its present depositors in full, and public interest will be adversely affected if it is allowed to carry on its banking business any further.