News Update

RBI fines RBL Bank Rs 2.27 crore for rule violations

• ByStartupStory     |    March 21, 2023

On March 20, the Reserve Bank of India (RBI) penalised RBL Bank with a fine of Rs 2.27 crore for non-compliance with certain regulations. 

According to the RBI, RBL Bank failed to adhere to specific provisions outlined in various directives, including those pertaining to the ‘Internal Ombudsman Scheme, 2018’, ‘Fair Practices Code for Lenders’, ‘Credit Card Operations of Banks’, ‘Managing Risks and Code of Conduct in Outsourcing of Financial Services by Banks’, and ‘Recovery Agents engaged by Banks’.

After conducting an examination, the central bank found that RBL Bank did not adequately communicate decisions made by its Internal Ombudsman in specific instances during the fiscal year 2020-21. Furthermore, the bank failed to ensure that its recovery agents, employed as part of debt collection efforts, did not engage in any form of intimidation or harassment during both fiscal year 2020-21 and 2021-22.

Additionally, the RBI stated that RBL Bank neglected to guarantee that its direct or indirect recovery agents had undergone a Direct Recovery Agents training course and obtained certification from the Indian Institute of Banking & Finance before their onboarding, spanning from fiscal year 2018-19 to 2021-22. The bank also failed to conduct pre-employment police verification for recovery agents engaged during this period.

Furthermore, during the fiscal year 2020-21, RBL Bank did not inform borrowers about the recovery agency’s specifics at the time of forwarding their cases to the said agency.

As a result, the RBI has issued a notice to the bank requesting an explanation as to why it failed to comply with the directives issued by the RBI, as mentioned in the notice, and advising the bank to provide reasons why a penalty should not be imposed on it.

In addition to this, the RBI has also levied monetary fines on several other banks, including Lokmangal Co-operative Bank, Jila Sahakari Kendriya Bank Maryadit, Smriti Nagrik Sahakari Bank Maryadit, and Raigad Sahakari Bank. 

The Smriti Nagrik Sahakari Bank Maryadit has been charged a penalty of Rs 4 lakh, Lokmangal Co-operative Bank Rs 3 lakh, Raigad Sahakari Bank Rs 1 lakh, and Jila Sahakari Kendriya Bank Maryadit Rs 50,000.

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