Due to failing to comply with interest rate guidelines and CRILC reporting modifications, DCB Bank and Tamilnad Mercantile Bank suffered penalties by RBI. Not transaction legitimacy, but problems with regulatory compliance were the cause of penalties.
DCB Bank and Tamilnad Mercantile Bank were penalized by the Reserve Bank of India on Tuesday for failing to follow specific instructions on the "interest rate on advances."
DCB Bank has been hit with a fine of Rs 63.6 lakh, the RBI stated in a statement.
The central bank stated in a separate statement that Tamilnad Mercantile Bank received a fine of Rs 1.31 crore for disregarding certain of its instructions regarding the "Interest Rate on Advances" and the "Central Repository of Information on Large Credits (CRILC)."
The RBI investigation of DCB Bank has shown that the bank did not reset the interest rates on some MCLR-linked floating rate advances at the required periodicity. Additionally, it did not compare the interest rates on specific floating-rate loans to MSMEs and retail customers to an external benchmark lending rate.
The RBI concluded that Tamilnad Mercantile Bank had violated several RBI guidelines in the case of its floating-rate loans to MSMEs. These violations included
1. Failing to benchmark the interest rate on these loans to an external benchmark lending rate.
2. Adopting multiple benchmarks within the same loan category.
3. Failing to price certain loans using the actual benchmark rate that applies to them.
4. Misreporting to CRILC the external rating of certain borrowers.
The RBI stated that in both instances, the fines were imposed for failures to comply with regulations and were not meant to judge the legality of any agreements or transactions the parties had made with their clients.
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