RBI imposes monetary penalty of 1.9 Cr on DCB and Tamilnad Mercantile Bank

The Reserve Bank of India (RBI) has imposed a Monetary Penalty of 1.9 Crores on DCB and Tamilnad Mercantile Bank.

RBI imposed a monetary penalty of Rs.63,60,000 on DCB Bank Ltd. (the bank) for non-compliance with certain directions issued by RBI on ‘Interest Rate on Advances’.

A monetary penalty of Rs.1,31,80,000 imposed on Tamilnad Mercantile Bank Limited (the bank) for non-compliance with certain directions issued by RBI on ‘Interest Rate on Advances’ and ‘Central Repository of Information on Large Credits (CRILC) – Revision in Reporting’.

The Statutory Inspection for Supervisory Evaluation (ISE 2022) of the bank was conducted by RBI with reference to its financial position as on March 31, 2022. Based on supervisory findings of non-compliance with RBI directions / statutory provisions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why a penalty should not be imposed on it for its failure to comply with the directions.

In the first case, the bank (i) failed to reset the interest rates at the prescribed periodicity in certain MCLR linked floating rate advances and (ii) failed to benchmark the interest rate of certain floating rate retail loans and floating rate loans to MSMEs to an external benchmark lending rate.

In the second case, the bank (i) failed to benchmark the interest rate on certain floating rate loans to MSMEs to an external benchmark lending rate; (ii) adopted multiple benchmarks within the same loan category; (iii) failed to price certain floating rate loans with reference to actual benchmark rate applicable to those loans and (iv) wrongly reported external rating of certain borrowers to CRILC.

After considering the bank’s reply to the notice, oral submissions made during the personal hearing and examination of additional submissions made by it, RBI found inter alia that the following charges against the bank were sustained warranting imposition of monetary penalty.

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