In January 2024, the Reserve Bank of India (RBI) levied monetary penalties totaling ₹2.49 crore on three banks—Dhanlaxmi Bank, Punjab & Sind Bank, and ESAF Small Finance Bank—for non-compliance with various regulatory guidelines. Here’s a breakdown of the violations and penalties imposed on each bank:
Dhanlaxmi Bank
- Penalty Amount: ₹1.20 crore
- Violations Identified:
- Non-adherence to RBI norms regarding loans and advances.
- Deficiencies in implementing Know Your Customer (KYC) standards.
- Errors in interest rates applied to deposit accounts.
RBI’s inspection (as of March 31, 2022) revealed that Dhanlaxmi Bank sanctioned loans against gold exceeding the prescribed limits, applied incorrect interest rates on specific deposits, and failed to collect complete details for some term deposits.
Punjab & Sind Bank
- Penalty Amount: ₹1 crore
- Issue Highlighted:
- Failure to comply with directions on loans and advances.
The RBI found that the bank had approved a term loan to a corporation without ensuring proper due diligence. The funds were subsequently misutilized for projects that lacked viability and repayment certainty.
ESAF Small Finance Bank
- Penalty Amount: ₹29.55 lakh
- Non-Compliance Noted:
- Failure to adhere to RBI’s guidelines on customer service.
ESAF allowed some Basic Savings Bank Deposit (BSBD) account holders to operate regular savings accounts simultaneously. Additionally, it did not close these accounts within the stipulated 30-day period as required after BSBD accounts were opened.
Key Takeaways for Customers
The RBI emphasized that these penalties were imposed for lapses in regulatory compliance and not to question the validity of customer transactions or agreements with these banks. However, if you are a customer of these banks, it’s essential to remain aware of these developments.
Such actions by the central bank highlight deficiencies in the management and processes of these institutions. At the same time, they also signal the likelihood of corrective measures being implemented to strengthen compliance and customer trust.
This serves as a reminder for all customers to stay informed about their bank’s performance, regulatory status, and overall financial health.
