RBI fines Rs 1 crore penalty on Union Bank of India

Union Bank of India was fined Rs. 1 crore by the Reserve Bank of India (RBI) on Friday, October 13, for failing to follow rules pertaining to "Loans and Advances - Statutory and Other Restrictions."

On October 13, 2023, RBI imposed this fine in accordance with the authority conferred by the Banking Regulation Act of 1949. The fine results from a recent RBI inspection that looked at the bank's financial standing as of March 31, 2021.

Review findings showed that Union Bank of India had violated RBI regulations when sanctioning a term loan to a firm. The bank specifically approved this loan in place of or as a replacement for budgeted resources allotted for particular projects.

The bank also failed to perform due diligence to evaluate the feasibility and bankability of these projects to make sure that their revenue streams would be adequate to meet debt service requirements. Additionally, budgetary resources were used for the loan's servicing and repayment.

Following these conclusions, the RBI sent Union Bank of India a letter requesting the bank to explain why a fine shouldn't be imposed for failing to follow regulatory instructions.