On October 13, 2023, the Reserve Bank of India (RBI) announced that it has levied monetary fines on Union Bank of India and RBL Bank for regulatory infractions. The RBI has imposed a penalty of Rs 1 crore on Union Bank of India and Rs 64 lakh on RBL Bank, as stated in their official release.
The penalty on Union Bank of India was imposed due to their failure to adhere to specific directives. The bank had sanctioned a term loan to a corporation in a manner that substituted budgetary resources originally designated for certain projects. This action was taken without conducting the necessary due diligence to assess the feasibility and bankability of these projects. The RBI's concern was that the revenue generated from these projects might not be sufficient to cover the debt servicing obligations. Furthermore, the repayment and servicing of the debt were being funded from budgetary resources, as indicated in the release.
Additionally, RBL Bank incurred a penalty due to its failure to secure the annual declaration in Form B from a significant shareholder within one month after the conclusion of the three financial years ending on March 31, 2018, March 31, 2019, and March 31, 2020. The bank also neglected to provide certificates to the RBI affirming the ongoing "fit and proper" status of this major shareholder by the end of September during these three financial years, as outlined in the release.