RBI Sends a Wake-Up Call: Union Bank Faces Penalty for Compliance Lapses

Image Source: Zee Business

Union Bank of India has come under regulatory scrutiny as the Reserve Bank of India (RBI) has imposed a monetary penalty of ₹1.06 crore for non-compliance with critical banking norms. The penalty was levied following findings related to lapses in the bank’s adherence to RBI’s directives on the “Creation of a Central Repository of Large Common Exposures-Across Banks” and “Know Your Customer (KYC)” guidelines.

Key Highlights:

Nature of Penalty: The RBI’s action stems from deficiencies in statutory and regulatory compliance, specifically relating to the accuracy and integrity of data reported to the Central Repository of Information on Large Credits (CRILC) and shortcomings in risk categorization of certain customers.
Inspection Findings: The penalty follows a statutory inspection for supervisory evaluation, which revealed that Union Bank failed to ensure proper KYC protocols and data integrity in its reporting systems as of March 31, 2022.
RBI’s Stance: The RBI clarified that the penalty is a result of compliance failures and does not question the validity of any customer transactions or agreements. The central bank emphasized the importance of robust compliance to maintain the integrity of the banking system.
Bank’s Response: Union Bank is expected to strengthen its internal controls and compliance mechanisms to prevent future lapses and align with regulatory expectations.

This development serves as a reminder of the RBI’s commitment to enforcing high standards of governance and transparency within the banking sector.

Sources: Economic Times, The Hindu Business Line, LexSite