Excerpt from TheHindu Article, Published on Feb 27, 2024
The Reserve Bank of India (RBI) has levied a hefty penalty of ₹66 lakh on City Union Bank Ltd. (CUB) due to what it terms ‘non-compliance’ with certain regulatory directives. The fine is because CUB did not follow the rules for prudential norms on recognizing income, classifying assets, making provisions for advances, and not following non-performing assets (NPA) and Know Your Customer (KYC) guidelines.
The action by the RBI comes following a statutory inspection conducted with reference to CUB’s financial position as of March 31, 2022. The inspection, inclusive of Risk Assessment and Inspection Reports, brought to light instances of non-compliance by the bank with the regulatory framework laid down by the central bank. CUB received a formal notice from the RBI questioning the rationale behind the apparent failure to comply with regulatory directives. The notice, issued on Monday, prompted CUB to respond and provide justification as to why penalties should not be imposed. Subsequently, the bank informed the Bombay Stock Exchange (BSE) about the notice on Tuesday, as part of its obligation to keep stakeholders informed about regulatory matters and developments affecting the institution.
The imposition of such a significant penalty underscores the RBI’s commitment to enforcing compliance standards within the banking sector and maintaining the integrity of the financial system. Non-compliance with regulatory directives not only poses risks to individual financial institutions but also undermines the stability and trustworthiness of the broader banking ecosystem. City Union Bank Ltd. now faces the task of addressing the concerns raised by the RBI and implementing corrective measures to ensure future adherence to regulatory guidelines. The penalty serves as a reminder to all financial institutions of the importance of robust compliance mechanisms and diligent oversight to mitigate risks and uphold regulatory standards in the banking industry.
To delve deeper into this topic, please read the full article in TheHindu.