The Reserve Bank of India (RBI) penalized five banks, including Punjab National Bank (PNB), in the first week of July for non-compliance with various RBI directions.

PNB became the fifth bank to be penalized, with a penalty of Rs 1.31 crore. This penalty was imposed for non-compliance with RBI directions regarding ‘Loans and Advances: Statutory and Other Restrictions’ and the ‘Reserve Bank of India (Know Your Customer (KYC) Direction, 2016.’

Before PNB, the RBI penalized four cooperative banks with various penalty amounts. These banks include The Gujarat Rajya Karmachari Co-operative Bank, Gujarat; The Rohika Central Co-operative Bank, Madhubani, Bihar; The National Co-operative Bank, Mumbai, Maharashtra; and The Bank Employees’ Co-operative Bank, West Bengal.

The Statutory Inspection for Supervisory Evaluation (ISE 2022) of the bank was conducted by RBI with reference to its financial position as of March 31, 2022. Based on supervisory findings of non-compliance with RBI directions and related correspondence, a notice was issued to the bank advising it to show cause as to why a penalty should not be imposed on it for its failure to comply with the directions.

The RBI said that after considering the bank’s reply to the notice and oral submissions made during the personal hearing, it found that the charges against the bank were sustained, warranting the imposition of a monetary penalty.

According to the RBI, Punjab National Bank sanctioned working capital demand loans to two state government-owned corporations against amounts receivable from the government by way of subsidies/refunds/reimbursements, which is a violation of RBI directions.

PNB also failed to preserve records pertaining to the identification of customers and their addresses obtained during the course of a business relationship in certain accounts. The action by RBI is based on deficiencies in regulatory compliance by Punjab National Bank.