RBI imposes penalties on UCO Bank and financial institutions for regulatory violations, KYC and compliance failures

The Reserve Bank of India (RBI) has stepped up its regulatory enforcement measures by imposing substantial monetary penalties on various financial institutions for failing to comply with its guidelines. The most significant penalty was imposed on UCO Bank, which was fined Rs 2.68 crore for multiple violations. These included non-compliance with RBI directives related to interest rates on deposits and advances, improper benchmarking of loans, and a failure to report fraudulent activities. This hefty fine reflects the central bank's zero-tolerance approach towards breaches of critical financial norms.

Additionally, several other banks and financial institutions were penalised for regulatory lapses. Durgapur Mahila Co-operative Bank Limited was fined Rs 1 lakh for breaching prudential inter-bank limits and exposure norms. The Chennai-based RAR Fincare Limited was fined Rs 25,000 for failing to obtain the necessary prior permission from the RBI before making significant changes to its management structure. These penalties are part of the RBI’s ongoing efforts to enforce compliance, ensure better governance, and promote transparency across the financial system.

Smaller institutions were not exempt from scrutiny. The Mahoba Urban Co-operative Bank in Uttar Pradesh was fined Rs 8 lakh for failing to adhere to regulations related to Income Recognition and Asset Classification (IRAC) norms and exposure limits. The bank was found guilty of misclassifying non-performing assets (NPAs) and failing to transfer funds to the Depositor Education and Awareness Fund (DEAF), mandated by the RBI.

Furthermore, Cent Bank Home Finance Limited received a penalty of Rs 2.10 lakh for failing to conduct periodic risk reviews under the RBI's Know Your Customer (KYC) directions, highlighting the importance of due diligence in banking operations. The Uttarkashi Zila Sahkari Bank in Uttarakhand was fined Rs 2 lakh for sanctioning loans where a director acted as guarantor, which goes against the RBI's conflict-of-interest policies.

The U.P. Postal Primary Co-operative Bank Ltd. in Lucknow was penalized Rs 3 lakh for offering higher deposit interest rates than permitted under the RBI’s Supervisory Action Framework (SAF). This violation reflects the importance of adhering to prescribed interest rates to maintain financial discipline and avoid market distortions.

These penalties underscore the RBI's commitment to enforcing compliance and maintaining the health of the financial ecosystem. The central bank continues to prioritize financial stability by holding institutions accountable for governance lapses, ensuring that both large and small entities comply with the regulations designed to protect customers and the broader economy.