RBI imposes monetary penalty on Indian Overseas Bank

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹31.80 lakh (Rupees Thirty One Lakh Eighty Thousand only) on Indian Overseas Bank (the bank) for non-compliance with certain directions issued by RBI on ‘Priority Sector Lending (PSL) – Targets and Classification’.

This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949.

The Statutory Inspection for Supervisory Evaluation (ISE 2024) of the bank was conducted by RBI with reference to its financial position as on March 31, 2024. Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said directions.

The penalty has been imposed as: The bank collected loan related charges in certain PSL accounts, each having sanctioned loan amount upto ₹25,000/-.

The action is based on 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. Further, imposition of monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank.