The RBI on Wednesday said it has imposed a fine of Rs 10 lakh on South Indian Bank for violating norms regarding bank guarantees.
The penalty follows references from a government department and a private party alleging non-payment of invoked bank guarantees by the lender, the Reserve Bank said in a statement.
The penalty has been imposed through an order dated June 13.
"Examination in this regard revealed violation of RBI directions on 'Guarantees and Co-acceptances' and a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for non-compliance with the directions," the RBI said.
After considering the bank's reply, oral submissions made during the personal hearing and additional submission, the RBI said it came to the conclusion that the charge of non-compliance with directions was substantiated and warranted imposition of monetary penalty.
However, the RBI added the action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.
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