The Reserve Bank of India (RBI) has imposed a US$0.19 million penalty on ‘Indian Bank’ for non-compliance with RBI’s directions related to loans, KYC, and interest rates. The penalty arises from the bank’s deficiencies in regulatory compliance and is not a judgment on the validity of transactions with customers.

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Background:

• The RBI conducted a Statutory Inspection for Supervisory Evaluation (ISE 2021) of Indian Bank based on its financial position as of March 31, 2021.
• The inspection revealed non-compliance with RBI directions, including:
  Sanctioning a term loan to a corporation without conducting due diligence on project viability and funding sources.
  Allowing open accounts through OTP-based e-KYC without performing customer due diligence.
  Opening savings accounts for customers not eligible for such accounts.
• The RBI issued a notice to the bank, which responded and presented oral submissions during a hearing.
• After evaluating the bank’s response, the RBI concluded that non-compliance had been established, warranting the monetary penalty.