RBI Imposes A Monetary Penalty of Rs 56 Lakhs On This Private Sector Bank

The Reserve Bank of India (RBI) slapped a monetary penalty of Rs 56 lakh on The Nainital Bank Ltd (NBL), Uttarakhand, yesterday on 29th October 2021 for non-compliance with directions contained in RBI circulars on "Prudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining to Advances - Divergence in NPA Accounts" dated August 04, 2011.

This penalty has been levied as a result of RBI's authority granted under the Banking Regulation Act of 1949. The central bank initiated this decision in response to regulatory compliance issues, and it is not meant to rule on the legitimacy of any transaction or agreement between the bank and its customers.

The RBI conducted a Statutory Inspection for Supervisory Evaluation (ISE) of the bank based on its financial condition as of March 31, 2019. RBI further clarified in a statement that "The examination of the Risk Assessment Report, Inspection Report and all related correspondence pertaining to the same, revealed, inter alia, non-compliance with the above-mentioned directions to the extent of (i) divergence between bank's reported NPAs and NPAs assessed by the Inspection on account of failure to classify certain borrower accounts as NPA, (ii) failure to disclose material divergences relating to asset classification and provisioning identified by RBI, despite exceeding the defined threshold, in the Notes to Accounts and (iii) failure to report frauds as per RBI directions. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for non-compliance with the RBI directions, as stated therein."

After considering the bank's reply to the notice, oral submissions made during the personal hearing and additional submissions made by the bank, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty on the bank, to the extent of non-compliance with the aforesaid directions, RBI claimed yesterday.