RBI imposes Monetary Penalty of Crores on Dhanlaxmi Bank, ESAF Small Finance Bank, Punjab and Sind Bank

The Reserve Bank of India (RBI) imposed monetary penalties on ESAF Small Finance Bank, Dhanlaxmi Bank, and Punjab and Sind Bank for rule violations.

The central bank levied monetary penalties of Rs. 1.20 crore on Dhanlaxmi Bank, Rs. 1 crore on Punjab and Sind Bank, and Rs. 29.55 lakh on ESAF Small Finance Bank.

Dhanlaxmi Bank has sanctioned loans to certain borrowers against pledges of gold ornaments and jewellery for non-agricultural purposes in excess of 75% of the value of the gold ornaments and jewellery, and has offered interest rates comparable to normal term deposits on certain senior citizen term deposits rather than a higher rate of interest applicable to such deposits, resulting in penalization.

According to a RBI press release, the bank also failed to obtain PAN or Form 60 for certain term deposit accounts (over fifty thousand rupees) and assigned multiple Customer Identification Codes to individual customers rather than a Unique Customer Identification Code (UCIC) to each customer.

Furthermore, Punjab and Sind Bank was penalised because it sanctioned a term loan to a Corporation in lieu of or to substitute budgetary resources envisaged for certain projects, without conducting due diligence on the viability and bankability of the projects to ensure that revenue streams from the projects were sufficient to meet debt servicing obligations, and the repayment/servicing of which was made with budgetary funds.

ESAF Small Finance Bank was penalised for allowing certain Basic Savings Bank Deposit (BSBD) account holders to open savings bank deposit accounts and failing to close certain savings bank deposit accounts within 30 days of such customers opening BSBD accounts.

Separately, the RBI slapped a Rs. 6 lakh fine on Sakthi Finance for failing to categorise its customers and update KYC on a regular basis for its high-risk customers throughout the financial year 2021-22 as part of its ongoing customer due diligence.