The Reserve Bank of India (RBI) has taken decisive action against three financial institutions—Shriram Finance, Ujjivan Small Finance Bank, and The Nainital Bank Limited—by imposing monetary penalties due to their failure to comply with various regulatory standards. These penalties were enforced under the Banking Regulation Act, 1949, following the RBI’s Inspection for Supervisory Evaluation (ISE 2023), which evaluated the financial status of these institutions as of March 31, 2023. The infractions included not following interest rate guidelines, issues with loan documentation, and lapses in risk categorization.
Why Did RBI Penalize These Banks?
- The Nainital Bank Limited has been fined ₹61.40 lakh for not adhering to RBI’s regulations regarding ‘Interest Rate on Advances’ and ‘Customer Service in Banks.’ The bank failed to link floating rate loans to MSMEs with an external benchmark rate, which is a requirement set by the RBI. Additionally, it charged a fixed penalty for not maintaining the minimum balance in savings accounts rather than applying a proportionate fee based on the shortfall.
- Ujjivan Small Finance Bank was fined ₹6.70 lakh for not issuing loan agreements to some borrowers at the time of loan disbursement. This violated RBI’s guidelines under ‘Loans and Advances – Statutory and Other Restrictions.’
- Shriram Finance received a penalty of ₹5.80 lakh for not setting up a system to review risk categorization of accounts periodically, which is essential for regulatory compliance.
