The Reserve Bank on Friday said it has imposed a penalty of Rs 27.5 lakh on Punjab & Sind Bank for non-compliance with certain directions issued by it on 'external benchmark-based lending'.

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A statutory examination of Punjab & Sind Bank revealed non-compliance with the directions, inter-alia, to the extent the bank linked certain floating rate retail loans and floating rate loans to micro and small enterprises, extended by it after October 1, 2019, to MCLR instead of an external benchmark, RBI said.

A show cause notice was issued to the bank.

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"After considering the bank's reply to the notice, oral submissions made in the personal hearing and examination of additional submissions made by it, RBI came to the conclusion that the charge of non-compliance ... Was substantiated and warranted imposition of monetary penalty...," RBI said.

The Reserve Bank of India (RBI), however, added that the penalty 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.