RBI penalizes five banks, including PNB, for non-compliance: Read more

In the first week of July, the Reserve Bank of India (RBI) penalised five banks, including Punjab National Bank (PNB), for failing to comply with various RBI guidelines.

Which banks have been penalised by RBI?

PNB became the fifth bank to be fined ₹1.31 crore. This penalty was imposed for non-compliance of RBI guidelines on ‘Loans and Advances: Statutory and Other Restrictions’ and ‘Reserve Bank of India (Know Your Customer (KYC) Direction, 2016’).

Before PNB, the RBI had penalised four co-operative banks with varying amounts of penalty. These banks are: The Gujarat Rajya Karmachari Co-operative Bank, Gujarat; The Rohika Central Co-operative Bank, Madhubani, Bihar; The National Co-operative Bank, Mumbai, Maharashtra; and The Bank Employees’ Co-operative Bank, West Bengal.

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The penalty on PNB was imposed on July 3, 2024. The RBI said, “The Reserve Bank of India (RBI) vide its order dated July 3, 2024, has imposed a monetary penalty of Rs. ₹1,318,000 (Rupees 1 crore thirty one lakh eighty thousand only) to Punjab National Bank (the Bank) for non-compliance with certain guidelines issued by RBI.”

“This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47 A(1)(c) read with Section 46(4)(i) and Section 51(1) of the Banking Regulation Act, 1949,” the RBI said in a statement on Friday.

Why did RBI punish PNB?

The RBI conducted a statutory inspection for supervisory assessment (ISE 2022) of the bank in respect of its financial position as on March 31, 2022. Based on the supervisory findings regarding non-compliance of RBI guidelines and related correspondence, a notice was sent to the bank directing it to show cause as to why penalty should not be imposed on it for non-compliance with the guidelines.

The RBI said that after considering the bank’s response to the notice and the oral submissions made during the personal hearing, the RBI found that the allegations against the bank were upheld, justifying the imposition of a monetary penalty.

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According to the RBI, Punjab National Bank approved working capital loans at the request of two state government-owned corporations against amounts due from the government in the form of subsidy/refunds/compensation, in violation of RBI guidelines.

PNB also failed to retain customer identification and address details obtained during the business relationship on some accounts. The RBI action is based on regulatory compliance deficiencies of Punjab National Bank.

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