RBI slaps penalty on SBI, Bank of Baroda and 12 other banks, should customers worry?

New Delhi: The Reserve Bank of India (RBI) has slapped 14 banks with cash penalties on 14 banks due to their non-compliance with certain provisions. Some of the notable banks which came under the radar of RBI include Bank of Baroda, State Bank of India (SBI), Bandhan Bank, Bank of Maharashtra, Central Bank of India, Credit Suisse AG, Indian Bank, IndusInd Bank, Karnataka Bank, Karur Vysya Bank, Punjab & Sind Bank, South Indian Bank, The Jammu & Kashmir Bank and Utkarsh Small Finance Bank. 

The banks were penalised for not complying with RBI directives on lending to non-banking financial companies, bank finance to non-banking financial companies, loans and advances - statutory and other restrictions, among other norms, according to an IANS report. 

In total, RBI has slapped a total penalty of Rs 14.50 crore, of which Bank of Baroda is paying the highest amount at Rs 2 crore while the State Bank of India is fined with the lowest amount at Rs 50 lakhs. 

"A scrutiny in the accounts of the companies of a group was carried out by the RBI and it was observed that the banks had failed to comply with provisions of one or more of the aforesaid directions issued by the RBI and or contravened provisions of the Banking Regulation Act, 1949,” the RBI said in its statement. 

The central bank also noted that the replies that banks gave provided it are duly considered "to the extent the charges of non-compliance with RBI directions or contraventions of provisions of Banking Regulation Act, 1949 were sustained." 

As a result, RBI has concluded that it warranted the imposition of cash penalty on the fourteen banks. "In furtherance to the same, `Notices` were issued to the banks advising them to show cause as to why penalty should not be imposed for non-compliance with the directions or contraventions of provisions of Banking Regulation Act, 1949," the RBI said. 

Will fine impact customers? 

RBI said that the rules related to Central Repository of Large Common Exposures, Central Repository of Information on Large Credits (CRILC) reporting in banks, operating guidelines of Small Finance Bank have been compromised by the banks. Also Read: Earned leaves to increase to 300, changes in salary and PF? Big decisions will be taken soon

Banks have also violated section 19(2) and section 20(1) of the Banking Regulation Act, 1949, RBI noted. Since the penalties are imposed on banks for lack of regulatory compliance, the fines won’t have any impact on the banks' customers. Also Read: Sensex ends above 53K for first time, Nifty rose to record peak