In a series of strict regulatory actions, the Reserve Bank of India (RBI) has imposed heavy penalties on major financial institutions and cancelled the licenses of two cooperative banks. Here’s everything you need to know about the latest RBI crackdown and what it means for customers.
The RBI has taken serious action against Indian Bank and Mahindra & Mahindra Financial Services for deficiencies in regulatory compliance.
Indian Bank has been fined ₹1.61 crore.
The penalty was imposed for violations of provisions under the Banking Regulation Act.
Specific lapses included not following the prescribed norms related to interest rates on loans, the Kisan Credit Card (KCC) scheme, and loans to Micro, Small, and Medium Enterprises (MSMEs).
In a separate action:
Mahindra & Mahindra Financial Services, a prominent Non-Banking Financial Company (NBFC), has been fined ₹71.30 lakh.
The fine was related to non-compliance with certain RBI guidelines.
Importantly, the RBI clarified that these penalties are based purely on regulatory shortcomings and do not affect the validity of customer transactions or agreements with these institutions.
Besides imposing fines, the RBI also announced the cancellation of licenses of two struggling co-operative banks:
Imperial Urban Co-operative Bank, based in Jalandhar, Punjab.
Ajanta Urban Co-operative Bank Limited, located in Aurangabad, Maharashtra.
The central bank cited the following reasons:
Both banks had insufficient capital.
There were no earning prospects to sustain future operations.
Continuing operations would have been detrimental to depositors’ interests.
The Registrar of Cooperative Societies of the respective states has been asked to initiate closure proceedings and appoint liquidators to manage the winding-up process.
For customers worried about the safety of their deposits, here’s the reassurance:
Depositors of both banks are protected under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme.
Each depositor is eligible to receive up to ₹5 lakh (covering both principal and interest).
In the case of Ajanta Urban Cooperative Bank, 91.55% of depositors will get their entire deposits through DICGC insurance.
For Imperial Urban Co-operative Bank, 97.79% of the depositors will be fully compensated.
This move highlights the critical role of DICGC in safeguarding small depositors during banking crises.
RBI’s actions underline its zero-tolerance policy towards non-compliance.
Even well-known financial institutions are not immune to regulatory scrutiny.
Customers should stay updated about their banks’ financial health and diversify deposits if they exceed the insurance limit.
The protection offered by DICGC provides a major layer of security for depositors, ensuring minimal loss even in the event of a bank failure.
The RBI’s latest measures reinforce the importance of strict adherence to regulations to maintain public trust in the banking system. While penalties and license cancellations may seem harsh, they are necessary steps to ensure that only financially sound and ethically compliant institutions operate in India’s banking and financial landscape.
Customers of Indian Bank and Mahindra Finance have no need to panic, as their day-to-day banking transactions remain unaffected. Meanwhile, depositors of Imperial and Ajanta Urban Co-operative Banks should closely follow updates from DICGC and the appointed liquidators to claim their insured amounts.
Stay tuned for further updates on RBI actions and other financial sector developments.
