RBI imposes fines on Union Bank of India, RBL Bank, Bajaj Finance over regulatory lapses

The Reserve Bank of India (RBI) on Friday (October 13) has imposed monetary penalties on Union Bank of India, RBL Bank, and Bajaj Finance Ltd for not following regulatory norms. The penalty was levied on October 13, 2023, in accordance with the powers granted under the Banking Regulation Act, of 1949. 

In a statement, the Reserve Bank of India (RBI) said a Rs 1 crore penalty has been imposed on state-run Union Bank of India for contravention of its directions related to 'Loans and Advances – Statutory and Other Restrictions'.

A penalty of Rs 64 lakh has been slapped on private sector RBL Bank Ltd for non-compliance with certain directions of the RBI (Prior approval for acquisition of shares or voting rights in private sector banks) Directions, 2015, the central bank said in another statement.

In another release, it said penalty of Rs 8.5 lakh has been imposed on Bajaj Finance Ltd for non-compliance with the 'Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016'.

RBI said it had conducted a review on Union Bank of India, where it found that the bank had failed to adhere to RBI's guidelines regarding the sanctioning of a term loan to a corporation. Specifically, the bank authorised this loan in lieu of or to substitute budgetary resources allocated for certain projects.

Additionally, the bank did not conduct due diligence to assess the viability and bankability of these projects to ensure that their revenue streams would be sufficient to meet debt servicing obligations. 

In the case of RBL Bank, the bank was fined as it failed to obtain the annual declaration in Form B from one of its major shareholders. The bank had failed to get the declaration within one month of the close of the three financial years, ie FY 19, FY20, and FY21. 

RBi said the bank was also unable to furnish certificates to RBI regarding continuance of the 'fit and proper’ status of one of its major shareholders, by the end of September of the said three financial years.

"This 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," RBI said in a release.

In case of Bajaj Finance Limited, RBI fined the NBFC as it found deficiencies in regulatory compliance. 

RBI said the company failed to comply with the RBI directions to the extent of not reporting and delay in reporting of certain frauds to RBI. 

Besides, the central bank also said it has approved the scheme of amalgamation of The Suvikas People's Co-operative Bank Ltd, Ahmedabad, with The Kalupur Commercial Co-operative Bank Ltd, Ahmedabad.

On Thursday, the central bank imposed a fine of Rs 5.39 crore on Paytm Payments Bank for non-compliance of certain provisions of RBI guidelines related to Know your customer (KYC), cybersecurity, etc.

According to RBI, Paytm failed to comply a provisions of RBI guidelines. Failure to report a cybersecurity incident on time is one of multiple incidents where RBI guidelines were not followed.