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Why did the RBI impose penalties on SBI, BOB, and 12 other banks?

The Reserve Bank of India (RBI) has levied fines on 14 banks for failing to comply with important RBI guidelines. A Press Release was published on 7 July 2021 in this regard from the RBI. Banks were penalised for failing to observe RBI rules on lending to non-banking financial enterprises, bank funding to non-banking financial firms, statutory and other limitations on loans and advances, and other laws. The Reserve Bank of India issued a total penalty of Rs 14.50 crore, with the Bank of Baroda paying the most (Rs 2 crore) and the State Bank of India getting the least (Rs 50 lakhs). The RBI examined the accounts of a group of firms and found that "the banks had failed to comply with requirements of one or more of the aforementioned directives issued by the RBI and or contravened provisions of the Banking Regulation Act, 1949," the RBI said in a statement. Banks were sent with notices asking them to show cause why a penalty should not be imposed for failing to follow the directions/provisions of the Banking Regulation Act of 1949. Following a review of the answers, the RBI decided that penalties against the fourteen institutions listed above were warranted. According to the RBI, the Central Repository of Large Common Exposures, Central Repository of Information on Large Credits (CRILC) reporting in banks, and Small Finance Bank operating rules have all been hacked. The RBI further stated that banks have violated sections 19(2) and 20(1) of the Banking Regulation Act of 1949. The fines will have no effect on the banks' clients because they are levied on banks for failing to comply with regulatory standards.


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