The Reserve Bank of India (RBI) imposed monetary penalties on Indian Bank, Indian Overseas Bank, and Mahindra & Mahindra Financial Services Ltd (NBFC) for non-compliance with regulatory directions.
Key Highlights
| Institution | Penalty Amount | Reason for Penalty |
| Indian Bank | ₹1.60 crore | Non-compliance with RBI lending and reporting norms. |
| Indian Overseas Bank | ₹63.60 lakh | Violation of collateral security norms for priority sector lending. |
| Mahindra & Mahindra Financial Services Ltd | ₹71.30 lakh | Violations in disclosure, communication, and customer identification. |
Penalty on Indian Bank (₹1.60 crore)
RBI imposed penalty on Indian Bank for multiple violations:
Failure to benchmark interest rates on:
- Certain floating rate retail loans.
- Certain loans to MSMEs (Micro, Small, Medium Enterprises) to an external benchmark rate as per RBI guidelines.
Violation of collateral security norms:
- Obtaining collateral for Kisan Credit Card (KCC) loans up to ₹1.60 lakh.
- Obtaining collateral for loans up to ₹10 lakh to Micro and Small Enterprises (MSEs).
- Both violate RBI’s priority sector lending guidelines (which prohibit collateral requirement for such loans).
Failure to transfer eligible amounts to the Depositor Education and Awareness (DEA) Fund within the prescribed time.
Penalty on Indian Overseas Bank (₹63.60 lakh)
RBI imposed penalty on Indian Overseas Bank for similar violations:
Obtained collateral security:
- For agricultural loans up to ₹1.60 lakh.
- For loans up to ₹10 lakh to certain MSEs.
- Violates RBI guidelines on collateral-free loans for priority sector lending.
Penalty on Mahindra & Mahindra Financial Services Ltd (₹71.30 lakh)
RBI imposed penalty on Mahindra & Mahindra Financial Services Ltd (NBFC) for:
Failure to disclose processing fees and charges in loan application forms.
Did not provide loan agreements or loan details to certain borrowers:
- Failed to furnish copies of loan agreements.
- Did not convey loan details in sanction letters to some borrowers.
Did not provide final opportunity to repay loans:
- Certain borrowers were not given final chance to repay before sale or auction of vehicles under recovery.
Violation of Unique Customer Identification Code (UCIC) norms:
- Multiple Customer IDs issued to same borrowers instead of assigning a single UCIC.
Regulatory Context
- RBI guidelines aim to enhance transparency, fair practices, and customer protection in banking and financial services.
- Violations reflect non-adherence to priority sector lending norms, fair lending practices, and customer identification standards.
Why it matters?
- Reinforces RBI’s supervisory role and enforcement of regulatory compliance.
- Highlights importance of:
- Benchmarking loans to external rates.
- Providing collateral-free loans under priority sector lending.
- Following fair lending practices and customer transparency norms.