These actions on all the 4 entities are based on deficiencies in regulatory compliance
FinTech BizNews Service
Mumbai, January 13, 2024: The Reserve Bank of India (RBI) has, by separate
orders in January 03, 2024 imposed a monetary penalty on each of 3 banks and one
NBFc. These actions on all the 4 entities are based on deficiencies in regulatory
compliance, as per the press releases issued by the RBI on January 12, 2024.
RBI has imposed monetary penalty on Punjab and Sind Bank, Dhanlaxmi Bank,
ESAF SFB and Sakthi Finance. These actions on all the 4 entities are based on
deficiencies in regulatory compliance.
Punjab and Sind Bank
The Reserve Bank of India (RBI) has, by an order dated January 03, 2024 imposed
a monetary penalty of Rs1 crore (Rupees One Crore only) on Punjab and Sind
Bank (the bank) for non-compliance with certain directions issued by RBI on ‘Loans
and Advances – Statutory and Other Restrictions’. 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.
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.
Background
The Statutory Inspection for Supervisory Evaluation (lSE 2022) of the bank was
conducted by RBI with reference to its financial position as on March 31, 2022. The
examination of the Risk Assessment Report / Inspection Report pertaining to ISE
2022, and all related correspondence in that regard, revealed, inter alia, non-
compliance with the aforesaid direction by the bank, to the extent it sanctioned a
term loan to a Corporation (i) in lieu of or to substitute budgetary resources
envisaged for certain projects; (ii) 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 (iii) the repayment
/ servicing of which was made out of budgetary resources. Consequently, 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 directions issued by RBI, as stated
therein.
After considering the bank’s reply to the notice, and oral submission 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.
Dhanlaxmi Bank
The Reserve Bank of India (RBI) has, by an order dated January 08, 2024,
imposed a monetary penalty of Rs120.47 lakh (Rupees One crore twenty lakh and
forty-seven thousand only) on Dhanlaxmi Bank Ltd. (the bank) for non-compliance
with certain directions issued by RBI on 'Loans and Advances – Statutory and
Other Restrictions', 'Reserve Bank of lndia (Know Your Customer (KYC))
Directions, 2016' and 'Reserve Bank of lndia (Interest Rate on Deposits) Directions,
2016'. This penalty has been imposed in exercise of powers vested in RBI
conferred under the provisions of Section 47A(1)(c) read with Section 46(4)(i) of the
Banking Regulation Act, 1949.
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.
Background
The Statutory Inspection for Supervisory Evaluation (ISE 2022) of the bank was
conducted by RBI with reference to its financial position as on March 31, 2022. The
examination of the Risk Assessment Report/Inspection Report pertaining to ISE
2022, and all related correspondence in that regard, revealed, inter alia, non-
compliance with the aforesaid directions by the bank, to the extent it (1) sanctioned
loans to certain borrowers against pledge of gold ornaments and jewellery for non-
agricultural purposes exceeding 75 per cent of the value of gold ornaments and
jewellery, (ii) offered interest rate applicable to normal term deposits on certain
senior citizen term deposits instead of higher rate of interest applicable to such
deposits, (iii) did not obtain PAN or Form 60 for certain term deposit accounts
(exceeding fifty thousand rupees), and (iv) allotted multiple Customer Identification
Code to certain individual customers instead of a Unique Customer Identification
Code (UCIC) to each customer. Consequently, a notice was issued to the bank
advising it to show cause as to why penalty should not be imposed on it for the
failure to comply with the directions issued by RBI, as stated therein.
After considering the bank's reply to the notice, oral submissions made during the
personal hearing and examination of additional submissions made by it, RBI came
to the conclusion that the aforementioned charge of non-compliance was
substantiated and warranted imposition of monetary penalty.
ESAF Small Finance Bank
The Reserve Bank of India (RBI) has, by an order dated January 05, 2024 imposed
a monetary penalty of Rs29.55 Lakh (Rupees Twenty Nine Lakh and Fifty Five
Thousand only) on ESAF Small Finance Bank Limited (the bank) for non-
compliance with the directions issued by RBI on ‘Customer Service in Banks’. This
penalty has been imposed in exercise of powers vested in RBI under the provisions
of Section 47A(1)(c) read with section 46(4)(i) of the Banking Regulation Act, 1949.
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.
Background
The statutory Inspection for Supervisory Evaluation (ISE 2022) of the bank was
conducted by RBI with reference to its financial position as on March 31, 2022. The
examination of the Risk Assessment Report (RAR) pertaining to ISE 2022, and all
related correspondence in that regard, revealed, inter alia, non-compliance with the
aforesaid directions by the bank to the extent it (i) allowed its certain Basic Savings
Bank Deposit (BSBD) account holders to open savings bank deposit account; and
(ii) failed to close certain savings bank deposit accounts within thirty days from the
date of opening of BSBD accounts for such customers. Consequently, 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 directions, as stated therein.
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.
Sakthi Finance
he Reserve Bank of India (RBI) has, by an order dated January 02, 2024, imposed
a monetary penalty of Rs6.00 Lakh (Rupees Six Lakh only) on Sakthi Finance
Limited, Coimbatore, Tamil Nadu (the company) for non-compliance with the
‘Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016’ issued by
RBI. This penalty has been imposed in exercise of powers vested in RBI under the
provisions of clause (b) of sub-section (1) of section 58 G read with clause (aa) of
sub-section (5) of section 58 B of the Reserve Bank of India Act, 1934.
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 company with its customers.
Background
The statutory inspection of the company was conducted by RBI with reference to its
financial position as on March 31, 2022, and examination of the Risk Assessment
Report and Inspection Report pertaining to the aforementioned inspection and all
related correspondence pertaining to the same, revealed, inter alia, that the
company did not undertake risk categorization of its customers and carry out
periodic updation of KYC for its high risk customers during the financial year 2021-
22, as part of on-going due diligence of its customers. Consequently, a notice was
issued to the company advising it to show cause as to why penalty should not be
imposed for its failure to comply with the RBI directions, as stated therein.
After considering the company’s reply to the notice, additional submissions made
by it 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, to the extent of such
non-compliance with such directions.
