RBI imposed Penalty of 2.9 crore on Canara Bank for this reason

The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs.2.92 crore on Canara Bank for non-compliance with certain provisions of directions issued by the central bank.

The RBI stated in a statement that this action is based on regulatory compliance problems and is not meant to rule on the legality of any transaction or arrangement made by the bank with its clients.

The bank’s financial status as of March 31, 2021, was the basis for the RBI’s statutory inspection for supervisory evaluation (lSE). Based on a high-value fraud detected by another bank, the RBI examined the bank in July 2020, it said.

The bank failed to tie the interest on variable rate retail loans and loans to MSME to an external benchmark, according to an examination of the risk assessment report, the scrutiny report, and all connected correspondences regarding the same.

Additionally, the bank opened a number of savings deposit accounts in the names of ineligible entities, registered fictitious mobile numbers in a number of credit card accounts, and failed to link interest on floating rate rupee loans approved and renewed during the financial year 2020–21 to its marginal cost of lending rate (MCLR).

It also neglected to carry out ongoing customer due diligence and implement reliable software for generating alerts when transactions were inconsistent with the customer profile. Furthermore, it failed to pay any interest on deposits accepted under the daily deposit scheme and prematurely withdrawn within 24 months of opening the accounts, recovered SMS alert charges from customers, not on an actual usage basis, and failed to undertake SMS alert charges from customers.

RBI concluded that the charge of non-compliance with the aforementioned RBI directions was substantiated and warranted imposition of a monetary penalty, to the extent of non-compliance with such directions, after taking into account the bank’s replies to the notices and oral arguments made during the personal hearing, it added.