RBI penalizes five banks, including PNB, for regulatory non-compliance in first week of July

The Reserve Bank of India (RBI) has penalized five banks, including Punjab National Bank (PNB), in the first week of July for non-compliance with various RBI directions.

PNB became the fifth bank to be penalized, with a penalty of Rs 1.31 crore. This penalty was imposed for non-compliance with RBI directions regarding 'Loans and Advances: Statutory and Other Restrictions' and the 'Reserve Bank of India (Know Your Customer (KYC) Direction, 2016'.

Before PNB, the RBI penalized four cooperative banks with various penalty amounts. These banks include 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.

The penalty on PNB was imposed on July 3, 2024. The RBI said, "The Reserve Bank of India (RBI) has, by an order dated July 3, 2024, imposed a monetary penalty of Rs 1,31,80,000 (Rupees One crore, thirty-one lakh, eighty thousand only) on Punjab National Bank (the bank) for non-compliance with certain directions issued by the RBI."

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

The Statutory Inspection for Supervisory Evaluation (ISE 2022) of the bank was conducted by the RBI with reference to its financial position as of March 31, 2022. Based on supervisory findings of non-compliance with RBI directions and related correspondence, a notice was issued to the bank advising it to show cause as to why a penalty should not be imposed on it for its failure to comply with the directions.

The RBI said that after considering the bank's reply to the notice and oral submissions made during the personal hearing, it found that the charges against the bank were sustained, warranting the imposition of monetary penalty.

According to the RBI, Punjab National Bank sanctioned working capital demand loans to two state government-owned corporations against amounts receivable from the government by way of subsidies, refunds/ reimbursements, it is a violation of RBI directions.

The PNB also failed to preserve records pertaining to the identification of customers and their addresses obtained during a business relationship in certain accounts. The action by RBI is based on deficiencies in regulatory compliance by the Punjab National Bank.