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The Indian banking sector has always been considered the backbone of the country’s economy, and the entire responsibility to keep it strong and reliable is on the Reserve Bank of India (RBI). Under this responsibility, RBI has recently imposed a heavy fine on three big banks using its regulatory power. These are banks that did not properly follow the rules and instructions made by RBI. These three banks are: Fincare Small Finance Bank, New India Co-operative Bank And Tamilnad Mercantil Bank,

Which banks were imposed on and why?

RBI continues to issue rules and guidelines to banks to maintain a clean and safe financial environment. When banks fail to follow these instructions, RBI acts on them so that the integrity of the financial system remains.

Let’s know in detail which banks, how much and for what reason the penalty was fined:

1. Fincare Small Finance Bank:

   • Fine: 1 crore rupees

   • Reason: Fincare Small Finance Bank has been fined for not following its ‘capital adequacy requirements’. The RBI said that the bank did not keep as much capital as it should have maintained under the rules. In addition, some instructions to interest rates on customer protection and ‘advance’ were also not followed.

2. New India Co-operative Bank:

   • Fine: 24.50 lakh rupees

   • Reason: This cooperative bank has been fined for interest rates on ‘deposit’, provisions of customers (KYC) rules and some RBI’s instructions to ‘not claimed accounts/transactions’ by depositors. Simply put, the bank did not implement the rules of interest on deposits and strict provisions of KYC properly.

3. Tamilnad Mercantiile Bank:

   • Fine: 13 lakh rupees

   • Reason: The bank has been fined for violating some criteria to safe transactions (unaccumbated SLR) and some flaws found in its ‘Supervisory Review Mechanism’. This means that the bank did not fully follow the rules of keeping its internal monitoring system strong.

Why is RBI’s tough stance important?

RBI plays the role of a guards. These fines are directly indicated that RBI is committed to maintaining stability and efficiency of India’s banking system. Action on banks that do not follow the rules also send a strong message to other banks that they have to follow the interests and financial rules of the customers in any case. This forces banks to work responsibly and hold strong internal control.

What will be the effect on customers?

The most important thing is that You don’t need to worry about your money! This penalty is not directly to the bank’s operational capabilities or safety of customers’ funds. These fines have been imposed for “violations of rules”, not due to the bank’s financial weakness. These are a punitive action if banks do not follow the rules properly so that they are more careful in the future.