Reserve Bank of India (RBI) has imposed a monetary penalty of Rs 1 Crore on Union Bank of India for non-compliance with directions issued on ‘Loans and Advances – Statutory and Other Restrictions’.
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, central bank said.
RBI in a release said the penalty has been imposed on Union Bank of India as bank non-compiled with certain directions and sanctioned a term loan to a Corporation in lieu of or to substitute budgetary resources envisaged for certain projects, without undertaking due diligence on the viability and bankability of the projects to ensure that revenue streams from the projects were sufficient to take care of the debt servicing obligations, and the repayment / servicing of which was made out of budgetary resources.
This penalty has been imposed in exercise of powers vested in RBI conferred under the provisions of Section 47 A (1) (c) read with Sections 46 (4) (i) and 51(1) of the Banking Regulation Act, 1949.
After considering the bank’s reply to the notice, and oral submissions made during the personal hearing, 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.
RBI in a separate circular said the RBL Bank has been penalised as bank failed to obtain annual declaration in Form B from one of its major shareholders, within one month of the close of the three financial years ending on March 31, 2018, March 31, 2019 and March 31, 2020, and 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.
In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for failure to comply with the said direction, RBI said.
