Case Brief
What Happened
The Reserve Bank of India imposed a monetary penalty of ₹1 crore on Indian Overseas Bank by order dated October 31, 2023. The penalty was levied for non-compliance with RBI directions on 'Loans and Advances – Statutory and Other Restrictions' and was imposed under Section 47A(1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949. RBI's inspection for supervisory evaluation (ISE 2022) found that the bank sanctioned term loans to corporate entities without adequate due diligence on the viability and bankability of the projects, including loans used in lieu of or to substitute budgetary resources, with repayment/servicing made out of budgetary resources. After issuing a show-cause notice, and considering the bank's reply and oral submissions, RBI concluded the non-compliance was substantiated and warranted a monetary penalty.