Bank of India, Bandhan Bank, and Indostar Capital Finance Ltd. Faced Monetary Penalties From RBI

NEW DELHI: Bank of India, Bandhan Bank, and Indostar Capital Finance Ltd have all been fined by the Reserve Bank of India (RBI) on 13th March 2024, for not following the rules. Bank of India was fined Rs. 1.4 crore for not following the RBI’s rules on interest rates, customer service, and the Credit Information Companies Rules, 2006.

Bandhan Bank has been fined Rs 29.55 lakh for not following certain guidelines.

The company Indostar Capital Finance Ltd was fined Rs 13.60 lakh for not following the “Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016″ and Know Your Customer (KYC) rules.

Based on supervisory findings of non-compliance with regulatory instructions/statutory provisions and related correspondence, the RBI issued a notice to the bank, advising it to show cause why a penalty should not be imposed for failing to comply with the instructions, according to a statement.

After evaluating the bank’s response to the notice, oral representations made during the personal hearing, and analysis of additional submissions made by it, the RBI determined that the accusations against the bank were upheld and warranted the imposition of a monetary penalty.

The RBI flagged six instances of the Bank failing to comply with certain directions issued it, including not paying interest in certain term deposit accounts as per the schedule of interest rates disclosed in advance; levying SMS alert charges from customers based on invalid mobile numbers rather than actual usage; failing to reset interest rates in MCLR (marginal cost of funds based lending rate) and external benchmark linked advances at prescribed periodicity;

Furthermore, the Bank failed to benchmark the interest on certain floating rate retail loans and floating rate loans to MSME against an external benchmark rate; failed to disclose or erroneously reported data relevant to certain major borrowers to CRILC; and failed to provide accurate information to CICs.

Following a statutory examination that was carried out by the Reserve Bank of India (RBI) to assess the financial situations of the institutions, the penalties were issued. The penalties are for regulatory compliance errors, and they do not call into doubt the legitimacy of any transactions or agreements with customers. This is a key point to keep in mind. It is the duty of the Reserve Bank of India (RBI) to ensure that banks and other financial institutions comply with the regulations that are necessary to preserve transparency and safeguard the interests of customers.