RBI Imposed Monetary Penalty on Suryoday Small Finance Bank; Check Reason

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹57.75 lakh (Rupees Fifty-seven lakh seventy-five thousand only) on Suryoday Small Finance Bank Ltd. (the bank) for non-compliance with the ‘Reserve Bank of India (Frauds classification and reporting by commercial banks and select FIs) directions 2016’ issued by RBI, by an order dated 20th July 2022.

This fine was levied in accordance with the authority granted to the RBI under Sections 47A (1)(c) and 46(4)(i) of the Banking Regulation Act of 1949.

This action is based on the regulatory compliance shortcomings and is not meant to rule on the legality of any deal or arrangement the bank has with its clients.

Background

The Statutory Inspection of the bank was conducted by RBI with reference to its financial position as on March 31, 2019, and the examination of the Inspection Report (IR) and all related correspondences pertaining to the same revealed, inter alia, noncompliance with the aforesaid RBI directions to the extent the bank failed to (i) furnish FMR to RBI, with respect to certain cases of fraud, within three weeks of their date of detection, and (ii) refer to State Police authorities certain cases of fraud committed by its staff. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for failure to comply with the said directions, as stated therein.

The RBI determined that the charge of non-compliance with the aforementioned RBI directions was substantiated and warranted imposition of a monetary penalty, to the extent of such non-compliance, after taking into account the bank’s response to the notice and oral arguments made in the personal hearing.