RBI Penalty on Banks: Reserve Bank of India (RBI) has imposed a fine of more than Rs 10 crore on three banks violating the rules.
Besides, RBI has also taken action against 5 cooperative banks. The central bank has imposed the maximum fine of Rs 5 crore on Citi Bank, Rs 4.34 crore on Bank of Baroda and Rs 1 crore on Indian Overseas Bank.
Why did action have to be taken?
The highest penalty has been imposed on private sector Citibank. This bank is accused of violating the Banking Regulation Act. Also, it is not following RBI guidelines for risk management and outsourcing of financial services. Bank of Baroda is accused of violating rules related to setting up the Central Repository of Large Common Exposures. On the other hand, Chennai-based public sector Indian Overseas Bank has been found guilty of not following the rules of loan and advance.
Customers will not be affected
The Reserve Bank clarified that the penalty has been imposed on these three banks for not following the guidelines properly. Its purpose is not to question the validity of any transaction or agreement entered into with banks and their customers. RBI has issued show cause notices to these banks. In this he has been asked to give clarification to avoid fine.
Five cooperative banks also measured
Earlier, RBI had imposed penalty on 5 cooperative banks violating various rules. These include Shri Mahila Seva Cooperative Bank, Porbandar Departmental Citizens Cooperative Bank, Sarvodaya Citizens Cooperative Bank, Khambhat Citizens Cooperative Bank and Vejalpur Citizens Cooperative Bank. A fine ranging from Rs 25 thousand to Rs 2.5 lakh has been imposed on them.
Took control of Abhyudaya Cooperative Bank in his hands
The Reserve Bank on Friday announced to supersede the board of Abhyudaya Cooperative Bank for the next one year. However, no restrictions have been imposed on the business of the bank. The Central Bank has appointed former Chief General Manager of State Bank of India, Satya Prakash Pathak, as the Administrator of Abhyudaya Cooperative Bank. Besides, a committee of advisors has also been appointed. The Reserve Bank says that due to the poor standards of governance of Abhyudaya Cooperative Bank, it has been forced to take action.
