RBI Imposes ₹1.45 Crore Penalty on Central Bank of India for Non-Compliance
The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹1,45,50,000 (Rupees One Crore Forty Five Lakh Fifty Thousand only) on Central Bank of India for non-compliance with certain directives. This decision, dated June 11, 2024, pertains to the bank’s violations of RBI’s guidelines on ‘Loans and Advances – Statutory and Other Restrictions’ and ‘Customer Protection – Limiting Liability of Customers in Unauthorised Electronic Banking Transactions’.
The Statutory Inspection for Supervisory Evaluation (ISE 2022), conducted by The Reserve Bank of India with reference to the financial position of the bank as of March 31, 2022, uncovered these non-compliances. The supervisory findings, along with subsequent correspondence, led RBI to issue a notice to Central Bank of India, demanding an explanation for its failure to adhere to the prescribed directions.
After reviewing the bank’s response to the notice, including oral submissions and additional documentation, The Reserve Bank of India concluded that the following breaches were substantiated:
1. The bank sanctioned a working capital demand loan to a corporation against amounts receivable from the government by way of subsidies, contrary to The Reserve Bank of India’s regulations.
2. The bank failed to credit (shadow reversal) the amount involved in several unauthorized electronic transactions to the customer’s account within 10 working days from the date of notification by the customer. Additionally, the bank did not resolve certain customer complaints or provide compensation within the stipulated 90-day period from the receipt of such complaints.
The Reserve Bank of India emphasized that this action highlights deficiencies in regulatory compliance and does not reflect on the validity of any transactions or agreements made by the bank with its customers. The imposition of the monetary penalty is independent of any other actions that RBI may undertake against the bank.
This penalty serves as a stern reminder of the importance of adhering to regulatory guidelines to ensure the protection of customer interests and the integrity of the banking system.
