RBI Slaps Rs2.70 Crore Penalty UCO Bank and Cent Bank Home Finance for Non-compliance
Moneylife Digital Team 02 September 2024
Reserve Bank of India (RBI) has imposed a penalty of Rs2.70 crore on UCO Bank and Cent Bank Home Finance Limited for violating various rules and regulations prescribed by the regulator. The highest penalty of Rs2.68 crore has been imposed on UCO Bank.
 
UCO Bank has been penalised for contravention of provisions of section 26A of the Banking Regulation Act (BR Act) and non-compliance with certain directions issued by RBI on interest rate on advances, opening of current accounts by banks—need for discipline, interest rate on deposits and frauds classification and reporting by commercial banks and select financial institutions (FIs).
 
The statutory evaluation of UCO Bank revealed several significant lapses. The Bank failed to benchmark floating rate personal or retail loans and loans to MSMEs to an external benchmark and it opened current accounts for non-constituent borrowers with exposure to the banking system of Rs5 crore or more. 
 
Additionally, UCO Bank opened savings deposit accounts in the names of ineligible entities and marked a lien against certain NRE savings deposits. The Bank also did not transfer unclaimed balances in fixed deposits, which had remained unclaimed for more than 10 years, to the depositors education and awareness fund (DEAF) within the required three-month period. Furthermore, it failed to report certain cases of fraud to law enforcement agencies.
 
Cent Bank Home Finance, a housing finance company (HFC), was penalised Rs2.10 lakh for non-compliance with certain provisions of RBI- know your customer (KYC) directions. The company failed to carry out periodic review of risk categorisation of accounts, with such periodicity being at least once in six months during FY21-22. 
 
"After considering the reply and oral submissions of the bank and the HFC during the personal hearing, RBI concluded that the charges of non-compliance with directions were substantiated and warranted imposition of monetary penalty," the central bank says.
 
In both cases, RBI says the penalties are based on deficiencies in regulatory compliance and are not intended to be pronounced on the validity of any transaction or agreement they entered into with their customer.
 
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