RBI imposes Rs 63.60 Lakh Penalty on Union Bank of India for Violating Guidelines
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The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹63.60 lakh on Union Bank of India for failing to comply with certain regulatory requirements. The penalty order, dated May 23, 2025, cites violations of Section 26A of the Banking Regulation Act, 1949, and non-compliance with RBI’s guidelines on collateral-free agricultural loans.
Why the Penalty Was Imposed
The action follows RBI’s routine inspections under the Statutory Inspections for Supervisory Evaluation (ISE) for the years 2023 and 2024, which reviewed Union Bank’s financial position as of March 31 in both years. The inspections revealed two key violations:
- Delay in Depositor Education and Awareness Fund Transfer: The bank failed to transfer eligible unclaimed amounts to the Depositor Education and Awareness (DEA) Fund within the stipulated timeframe.
- Collateral Taken for Small Agricultural Loans: Contrary to RBI guidelines, the bank obtained collateral for agricultural loans up to ₹1.60 lakh in certain cases, which should have been granted without any security.
Based on these findings, the RBI issued a show-cause notice to the bank, asking it to explain why a penalty should not be imposed. After reviewing the bank’s written response and oral submissions during a hearing, the RBI concluded that the violations were valid and warranted financial penalties.
The RBI emphasized that the penalty is strictly related to regulatory compliance shortcomings and does not question the legality or validity of the bank’s agreements with its customers. It also noted that this action is without prejudice to any further actions that may be taken in the future.
This enforcement reflects RBI’s ongoing commitment to ensuring banks adhere strictly to rules, particularly those aimed at protecting depositors and supporting priority sectors like agriculture.
