RBI Slaps Rs59.10 Lakh Penalty on Karnataka Bank for Opening Deposit Accounts of Illegal Entities
Moneylife Digital Team 20 May 2024
Reserve Bank of India (RBI) has imposed a penalty of Rs59.10 lakh on Karnataka Bank Ltd for violating directions on interest rate on deposits and prudential norms on income recognition, asset classification and provisioning pertaining to advances.
After a statutory inspection for superivsory evaluation (ISE 2022), RBI found that Karnataka Bank opened savings deposit accounts in the name of certain ineligible entities and failed to review or renew certain loan accounts within the prescribed period and yet did not classify these accounts as non-performing assets (NPAs).
After considering the Bank’s reply to the notice, oral submissions made during the personal hearing and examination of additional submissions made by it, RBI says, the charges against Karnataka Bank  were sustained, warranting imposition of monetary penalty.
However, the banking regulator clarified that its action against Karnataka Bank is based on deficiencies in regulatory compliance and is not intended to pronounce on the validity of any transactions or agreement entered into by the Bank with its customers. Further, imposition of monetary penalty is without prejudice to any other action that may be initiated against the Bank, RBI added.
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