Dhanlaxmi Bank, ESAF Small Finance Bank, and Punjab and Sind Bank Face RBI Penalties

Overview of Penalties

The Reserve Bank of India (RBI) has recently imposed monetary penalties on three financial institutions: Dhanlaxmi Bank, ESAF Small Finance Bank, and Punjab and Sind Bank. These penalties, amounting to a total of Rs 2.49 crore, were levied due to various non-compliance issues related to banking regulations.

Dhanlaxmi Bank’s Non-Compliance

Dhanlaxmi Bank faced a penalty of Rs. 1.20 crore. This was primarily for exceeding the prescribed loan-to-value ratio in gold loan transactions, and for offering interest rates on certain deposits that were not in line with the rates applicable to such deposits. Additionally, the bank did not adhere to norms related to PAN or Form 60 requirements for certain deposit accounts and failed to implement a Unique Customer Identification Code system effectively.

Punjab and Sind Bank’s Violations

Punjab and Sind Bank was penalized Rs. 1 crore. The bank was found to have sanctioned loans without proper due diligence on the viability of the projects for which the loans were sanctioned. The loans were intended to substitute budgetary resources for certain projects, but there were concerns about the sufficiency of revenue streams from these projects to meet debt obligations.

ESAF Small Finance Bank’s Infringements

ESAF Small Finance Bank was imposed a penalty of Rs. 29.55 lakh. The bank allowed certain Basic Savings Bank Deposit account holders to open additional savings bank deposit accounts, which is against the norms. Moreover, it failed to close certain savings bank deposit accounts in a timely manner as per the regulations.

Additional Penalty on Sakthi Finance

In a separate case, Sakthi Finance was fined Rs. 6 lakh by the RBI. This penalty was for not categorizing customers and updating Know Your Customer (KYC) details regularly for high-risk customers during the financial year 2021-22.

Conclusion

These penalties underscore the RBI’s commitment to enforcing strict compliance with banking regulations to maintain the integrity and stability of India’s banking sector. The actions taken by RBI are precautionary and remedial, aimed at ensuring that the banks align with the necessary regulatory standards.