Bank of Baroda imposed with Monetary Penalty of Rs. 4.34 crore by RBI

The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs.4.34 crore on Bank of Baroda (the bank) for non-compliance with certain directions issued by RBI on ‘Creation of a Central Repository of Large Common Exposures – Across Banks’ dated September 11, 2013 read with ‘Central Repository of Information on Large Credits (CRILC) – Revision in Reporting’ dated February 13, 2014, ‘Loans and Advances – Statutory and Other Restrictions’, and ‘Reserve Bank of India (Interest Rate on Deposits) Directions, 2016’.

RBI performed the bank’s Statutory Inspection for Supervisory Evaluation (lSE 2021) with regard to its financial situation as of March 31, 2021.

The examination of the Risk Assessment Report / Inspection Report pertaining to ISE 2021, and all related correspondence in that regard, revealed, inter alia, non-compliance with the aforesaid directions by the bank, to the extent it (i) failed to ensure accuracy and integrity of data on large exposures submitted to RBI with respect to some accounts, (ii) sanctioned a term loan to a Corporation (a) in lieu of or to substitute budgetary resources envisaged for certain projects; (b) 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 (c) the repayment / servicing of which was made out of budgetary resources, (iii) sanctioned a working capital demand loan to a Corporation against amounts receivable from government by way of subsidies, and (iv) did not pay interest rate on the deposits accepted from senior citizens, as per the schedule of interest rates disclosed in advance.

As a result, the bank was served with a notice requiring it to show cause why a penalty should not be imposed for failing to comply with the stated orders.

After analysing the bank’s response to the notice as well as oral representations made during the personal hearing, the RBI concluded that the allegation of non-compliance with the aforementioned RBI directives was proved and merited the imposition of monetary penalty.

This penalty has been imposed in exercise of powers vested in RBI conferred under the provisions of Section 47 A (1) (c) read with Sections 46 (4) (i) and 51(1) of the Banking Regulation Act, 1949.

This action is based on the 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.