TMB and DCB Bank are penalized by the Reserve Bank for benchmarking loans

TamilNad Mercantile Bank (TMB) and Mumbai-based DCB Bank have been hit with financial penalties by the Reserve Bank of India (RBI) for failing to follow specific directives from the regulator.

TMB was fined Rs 1.31 crore by the RBI on Tuesday for failing to comply with the regulations on the “Interest Rate on Advances” and the “Central Repository of Information on Large Credits (CRILC) – Revision in Reporting.”

According to the central bank, the bank used many benchmarks within the same loan category and neglected to benchmark the interest rate on certain variable rate loans to MSMEs to an external benchmark lending rate. The banking regulator has also brought attention to TMB’s inaccuracy in reporting to CRILC the external rating of specific borrowers and its failure to price certain variable rate loans based on the real benchmark rate that applied to such loans.

The action stems from regulatory compliance problems found during an RBI statutory inspection. The bank received a show-cause notice in response to supervisory findings. The RBI determined that the bank’s charges were justified and that a penalty should be imposed after taking into account the bank’s response, its oral representations during the personal hearing, and an analysis of its further submissions.

Likewise, DCB Bank was fined Rs 63 lakh for failing to follow guidelines on the “Interest Rate on Advances.” The requirements of section 47 A of the Banking Regulation Act have led to the imposition of these fines.