RBI Penalizes South Indian Bank: A Financial Governance Stand

The Reserve Bank of India imposed a Rs 59.20 lakh penalty on South Indian Bank for non-compliance with regulations on interest rates and customer service. An inspection highlighted failures, including not notifying customers of penal charges. RBI clarifies the penalty concerns compliance deficiencies, not transaction validity.

The Reserve Bank of India announced on Friday a substantial penalty of Rs 59.20 lakh on South Indian Bank. This action was due to the bank's non-compliance with specific RBI instructions on 'interest rate on deposits' and 'customer service in banks'.

This decision followed a statutory inspection for supervisory evaluation, referencing the bank's financial position as of March 31, 2023. The inspection revealed several discrepancies, leading to the issuance of a notice to South Indian Bank Limited.

After evaluating the bank's response and oral submissions, RBI confirmed the allegations. The bank had imposed charges on customers for not maintaining a minimum balance, often without sufficient notification. Additionally, liens were marked against certain NRE savings deposit accounts. The RBI stressed the penalty addresses compliance shortcomings, rather than questioning any customer agreements or transactions.

(With inputs from agencies.)