RBI Imposes Penalties On 5 Financial Entities For Regulatory Violations. Check The Lenders

The RBI clarified these penalties were imposed due to deficiencies in regulatory compliance and are not a reflection on the validity of any transactions or deals entered into by the penalised entities

The Reserve Bank of India (RBI) on Monday announced that it has imposed penalties on five financial entities, including CSB Bank, Union Bank of India, and Muthoot Housing Finance, for contraventions of various regulatory norms. A penalty of Rs 1.86 crore has been levied on CSB Bank for failing to comply with specific directions related to the 'Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks' and the 'Master Circular on Branch Authorisation'. This was revealed in a statement by the central bank.

In another statement, the RBI disclosed that Union Bank of India has been fined Rs 1.06 crore for non-compliance with norms concerning the 'Creation of a Central Repository of Large Common Exposures Across Banks' and 'Know Your Customer (KYC)' regulations.

Muthoot Housing Finance Company has been penalised Rs 5 lakh for violating provisions under the 'Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021', the RBI stated in a separate release.

Further penalties were also imposed on two other entities, Nido Home Finance Limited was fined Rs 5 lakh, and Ashoka Viniyoga Limited faced a penalty of Rs 3.1 lakh for regulatory non-compliance.

The RBI clarified that these penalties were imposed due to deficiencies in regulatory compliance and are not a reflection on the validity of any transactions or agreements entered into by the penalised entities.

Additionally, the central bank introduced new regulations for non-banking financial companies (NBFCs), requiring them to pay 100 per cent of the deposit amount within the first three months of accepting the funds if the depositor seeks withdrawal due to an emergency. The RBI stated that no interest will be paid for such premature withdrawals, and these changes will come into effect on January 1, 2025.

The definition of "critical illness" as determined by the Insurance Regulatory and Development Authority of India (Irdai) will guide whether a withdrawal request qualifies under this category, according to the RBI.

The central bank further specified that emergency expenses could include medical emergencies or costs arising from natural calamities or disasters as notified by the government.