RBI imposed penalty of Rs 1 crore on IDFC First Bank, know why

RBI fines IDFC Bank: Reserve Bank of India (RBI) has imposed a monetary penalty of Rs 1.00 crore on IDFC First Bank Limited for non-compliance with specific directives concerning 'Loans and vances – Statutory and Or Restrictions'. This penalty, mandated under Banking Regulation Act, of 1949, highlights regulatory oversight in ensuring herence to banking norms.

“Based on supervisory findings of non-compliance with RBI directions / statutory provisions and related correspondence in that regard, a notice was issued to bank vising it to show cause as to why penalty should not be imposed on it for its failure to comply with said directions,” RBI’s press release ded. 

penalty follows RBI's Statutory Inspection for Supervisory Evaluation (ISE 2022) of IDFC First Bank Limited, assessing its financial standing as of March 31, 2022. Subsequent supervisory findings revealed instances of non-compliance with RBI directives and statutory provisions, prompting regulatory action.

“ bank h sanctioned term loans to a public sector undertaking for financing infrastructure projects, (i) without undertaking due diligence on viability and bankability of projects to ensure that revenue streams from projects were sufficient to take care of debt servicing obligations and repayment/servicing of said term loans was me out of budgetary resources,” press release by RBI stated. 

Of particular concern was bank's approval of term loans for infrastructure projects involving a public sector undertaking. se loans were granted without equate due diligence on project viability and bankability, resulting in ir repayment being sourced from budgetary resources inste of project-generated revenue streams.

While penalty underscores importance of regulatory compliance, it's important to note that it does not imply a judgment on validity of bank's transactions with its customers. ditionally, RBI's decision to levy monetary penalty does not preclude furr regulatory actions against bank, signalling a continued commitment to upholding banking standards and safeguarding financial stability.