RBI Action: Reserve Bank Imposes Fine on this Bank Over Deposit Complaints

The Reserve Bank of India (RBI) has imposed a fine of ₹59.20 lakh on South Indian Bank due to non-compliance with specific directives related to interest rates on deposits and customer services. This action follows a detailed inspection and evaluation of the bank's financial position as of March 31, 2023.

Background of the Fine

RBI, as the regulator of banking practices in India, conducts regular audits to ensure banks comply with established norms. During an audit of South Indian Bank, discrepancies were identified, leading the RBI to issue a notice. After reviewing the bank’s response and a personal hearing, the RBI concluded that the bank had indeed breached regulations.

Key Reasons for the Fine

The primary issue was that South Indian Bank charged penalties and fees for not maintaining minimum balance without adequately informing certain customers through SMS, email, or letters. This non-compliance with customer service directives led the RBI to take corrective action.

RBI’s Stance on the Fine

RBI clarified that this fine aims to address shortcomings in regulatory compliance without impacting the validity of transactions or agreements between South Indian Bank and its customers.

This action highlights the RBI's commitment to enforcing compliance and protecting customer rights in the banking sector.