The Reserve Bank of India (RBI) on Friday (October 13) imposed a monetary penalty of ₹1 crore on Union Bank of India, citing non-compliance with regulatory directives pertaining to 'Loans and Advances – Statutory and Other Restrictions.'
This penalty was levied by RBI on October 13, 2023, in accordance with the powers granted under the Banking Regulation Act, of 1949. The penalty arises from a recent inspection conducted by RBI, examining the bank's financial position as of March 31, 2021.
The review revealed that Union Bank of India had failed to adhere to RBI's guidelines regarding the sanctioning of a term loan to a corporation. Specifically, the bank authorised this loan in lieu of or to substitute budgetary resources allocated for certain projects.
Additionally, the bank did not conduct due diligence to assess the viability and bankability of these projects to ensure that their revenue streams would be sufficient to meet debt servicing obligations. Moreover, the repayment and servicing of the loan were carried out using budgetary resources.
Following these findings, the RBI issued a notice to Union Bank of India, asking the bank to provide reasons why a penalty should not be imposed due to its failure to comply with the regulatory directions.
After considering the bank's response to the notice and conducting a personal hearing, RBI determined that the charges of non-compliance were substantiated and, as a consequence, warranted the imposition of a monetary penalty.
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It is important to note that this action by RBI is centred on deficiencies in regulatory compliance and does not pass judgment on the validity of any transactions or agreements made by the bank with its customers.
Shares of Union Bank of India ended at ₹103, down by ₹0.75, or 0.72 percent, on the BSE.
