RBI imposes Rs 1.31 crore penalty on Punjab National Bank

The Reserve Bank of India (RBI) on Friday imposed a monetary penalty of Rs 1.31 crore on Punjab National Bank (PNB) for non-compliance with certain directions related to Know Your Customer (KYC) norms and ‘loans and advances’.

The RBI conducted a statutory inspection of PNB concerning its financial position as of March 31, 2022. Following the inspection, a notice was issued to the bank. After reviewing PNB’s response, the RBI found that the bank had sanctioned working capital demand loans to two state government-owned corporations against amounts receivable from the government by way of subsidies, refunds, and reimbursements.

Additionally, PNB failed to preserve records about the identification of customers and their addresses obtained during business relationships in certain accounts, the RBI stated. However, the central bank clarified that the penalty is based on deficiencies in regulatory compliance and does not question the validity of any transactions or agreements entered into by the bank with its customers.

The Registrar of Cooperative Societies, Karnataka, has been requested to issue an order for winding up the bank and appointing a liquidator.

Upon liquidation, depositors will be entitled to receive a deposit insurance claim amount of up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC). According to the bank's data, approximately 99.96 per cent of the depositors are entitled to receive the full amount of their deposits from the DICGC.

The RBI further noted that PNB lacks adequate capital and earning prospects, and its continuance is prejudicial to the interests of its depositors. "The bank with its present financial position would be unable to pay its present depositors in full," the RBI added.

As of March 31, 2024, the DICGC has already paid Rs 11.85 crore of the total insured deposits based on the willingness received from the concerned depositors of the bank.

(With PTI inputs)