The Reserve Bank of India (RBI), through an order dated February 04, 2025, has levied a monetary penalty of ₹8.30 lakh (Rupees Eight Lakh Thirty Thousand only) on Karur Vysya Bank Limited for certain compliance lapses related to RBI’s guidelines on the ‘Loan System for Delivery of Bank Credit.
The bank underwent a Statutory Inspection for Supervisory Evaluation (ISE 2023) based on its financial position as of March 31, 2023. Following the review, and after a detailed process including supervisory findings and related correspondence, the bank was given an opportunity to present its case. Upon consideration of its responses and oral submissions, RBI determined that the bank had not ensured that the outstanding ‘loan component’ met the prescribed percentage of the sanctioned working capital limit for certain borrowers.
Similarly, Federal Bank Limited has been subjected to a monetary penalty of ₹27.30 lakh (Rupees Twenty Seven Lakh Thirty Thousand only) for certain non-compliances related to RBI’s directions on ‘Interest Rate on Deposits.’ This penalty has been imposed under the same regulatory provisions.
The Statutory Inspection (ISE 2023) for Federal Bank, based on its financial position as of March 31, 2023, revealed areas of non-compliance. After a thorough review process, including an opportunity for the bank to provide its explanation, RBI concluded that certain savings deposit accounts had been opened in the name of ineligible entities, leading to regulatory action.
It is important to note that these actions are aimed at reinforcing compliance with regulatory frameworks and do not impact the validity of transactions or agreements entered into by the banks with their customers. Additionally, these penalties are without prejudice to any further actions that RBI may take in accordance with regulatory provisions.
