RBI Slaps Rs10.34 Crore Penalty on Bank of Baroda, Citibank and Indian Overseas Bank
Moneylife Digital Team 24 November 2023
Reserve Bank of India (RBI) has imposed a penalty of Rs10.34 crore on Bank of Baroda (BoB), Citibank NA and Indian Overseas Bank for non-compliance with certain directions issued by the central bank.
 
RBI issued three separate statements on the penalties. A maximum fine of Rs5 crore is slapped on Citibank for failing to credit eligible amount to depositor education and awareness (DEA) fund within the prescribed period, paying remuneration in the form of commission to its certain staff members and outsourcing monitoring and disposal and closure, which is a decision-making function of anti-money laundering (AML) alerts, to a group company.
 
The banking regulator imposed a penalty of Rs4.34 crore on Bank of Baroda for failing to ensure the accuracy and integrity of data on large exposures submitted to RBI concerning some accounts. BoB also sanctioned a term loan to a corporation instead of or to substitute budgetary resources envisaged for particular projects without undertaking due diligence on the viability and bankability of the projects to ensure that revenue streams from the projects were sufficient to take care of the debt servicing obligations and making repayment and servicing out of budgetary resources. 
 
Further, BoB sanctioned a working capital demand loan to a corporation against amounts receivable from the government through subsidies and did not pay interest rates on the deposits accepted from senior citizens, as per the schedule of interest rates disclosed in advance, RBI says.
 
Indian Overseas Bank was slapped with a penalty of Rs1 crore for sanctioning term loans to three corporate entities in place of or to substitute budgetary resources envisaged for certain projects without undertaking due diligence on the viability and bankability of the projects to ensure that revenue streams from the projects were sufficient to take care of the debt servicing obligations and making repayment and servicing out of budgetary resources. 
 
However, RBI clarified that its action against these banks is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.
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