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RBI imposes rupees 1 crore monetary penalty on Union Bank of India

Mumbai: On October 13, 2023, RBI issued a press release in which a monetary penalty of Rupees 1 crore was imposed on India’s leading public sector bank “Union Bank of India”, the background of the penalty was non-compliance with important RBI direction related to the loans and advances – statutory and other restrictions. The penalty was imposed according to the Reserve Bank of India Act, 1934 provisions.

The above non-compliance came to light when RBI conducted the statutory inspection for supervisory evaluation of the Union Bank of India with reference to their financial position as on March 31, 2022.

Union Bank of India failed to comply with RBI’s direction to the extent it sanctioned a term loan to a corporation without considering the below-mentioned points:

  • In lieu of or to substitute budgetary resources envisaged for certain projects.
  • Without undertaking due diligence on the viability and bankability of projects to ensure that the revenue stream from projects was sufficient to take care of the debt-serving obligation.
  • The repayment of which was made out of budgetary resources.

Furthermore, RBI issued a show-cause notice to Union Bank of India, at last RBI came to the conclusion that the charge of non-compliance with RBI directions was substantiated and warranted imposition of monetary penalty and passed an order on October 03, 2023, imposed a monetary penalty of rupees 1 crore.

This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction entered into by the company with its customers: RBI said in a statement.

Banks are expected to adhere to the regulations and directions set forth by the RBI to ensure the smooth functioning of the banking system and protect the interests of customers.

For a comprehensive understanding of the RBI’s action, it is advisable to refer to the official website of RBI.

RBI also imposed a monetary penalty of rupees 64 lakh on RBL Bank upon the violation of RBI directions.

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