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RBI imposes Rs 2.92 cr fine on Canara Bank for violation of various norms

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The Reserve Bank of India on Friday said it has imposed a penalty of Rs 2.92 crore on Canara Bank for violation of various norms, including linking interest rates to external benchmark, and opening savings accounts of ineligible entities.


The Reserve Bank of India (RBI) conducted a statutory inspection for supervisory evaluation of the bank with reference to its financial position as on March 31, 2021.


“A scrutiny of the bank was carried out by RBI in July 2020 based on a high-value fraud reported by another bank,” the central bank said in a statement.


After scrutiny, the RBI found that the bank failed to link interest on floating rate retail loans and loans to MSME to an external benchmark and also failed to link interest on floating rate rupee loans sanctioned and renewed during financial year 2020-21 to its Marginal Cost of Lending Rate (MCLR).


The public sector lender, the RBI said, opened several savings deposit accounts in the name of ineligible entities, registered dummy mobile numbers in several credit card accounts, and failed to pay any interest on deposits accepted under the daily deposit scheme and prematurely withdrawn within 24 months of opening of the accounts.


The RBI also said the bank recovered SMS alert charges from customers, not on actual usage basis, and failed to undertake ongoing customer due diligence and put into use robust software for generating alerts when transactions were inconsistent with customer profile.


“In furtherance to the same, notices were issued to the bank advising it to show cause as to why penalty should not be imposed on it for failure to comply with the said directions, as stated therein,” the RBI said.


After considering the bank’s replies to the notices and oral submissions made during the personal hearing, the RBI said it came to the conclusion that the charge of non-compliance with the RBI directions was substantiated and warranted imposition of monetary penalty.


The RBI, however, added that the penalty on Canara Bank 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.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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