Page 8 - Banking Finance November 2021

RBI CORNER

Reserve Bank

News

RBI fines Paytm, Western loans including fraud loans that are in imposed for violation of the said direc-
default for more than 60 days or clas- tions, the RBI said.
Union sified as NPA are permitted to be "After considering the bank's reply,
The Reserve Bank has imposed a pen- transferred to ARCs. This comes in the RBI came to the conclusion that the
alty of Rs 1 crore on Paytm Payments wake of banks reporting frauds aggre-
aforesaid charge of contravention of
Bank Limited (PPBL) and Rs 27.78 lakh gating Rs 3.95-lakh crore between section 23 read with section 56 of the
on Western Union Financial Services for FY19 and FY21. Banking Regulation Act, 1949 was
non-compliance with certain directions. substantiated and warranted imposi-
In a release, the RBI said on examina- RBI slaps J&K co-op bank tion of monetary penalty," it further

tion of PPBL's application for issue of with Rs. 11 lakh fine said.
final Certificate of Authorisation (CoA),
The Reserve Bank of India has im-
it was observed that it had submitted RBI allows banks to sell
posed a monetary penalty to Rs. 11
information which did not reflect the lakh on The Jammu & Kashmir State fraud NPAs to ARCs
factual position.
Co-operative Bank, Srinagar. In a move that will help banks unload
"As this was an offence of the nature The penalty, imposed by an order on a major chunk of their non-perform-
referred to in Section 26 (2) of the September 23, is for contravention of ing assets (NPAs) to the bad bank, RBI
Payment and Settlement Systems Act, section 23 read with section 56 of the has allowed the sale of loan accounts
2007, a notice was issued to PPBL. Banking Regulation Act, 1949. classified as fraud to asset reconstruc-
"After reviewing the written re- "This penalty has been imposed in ex- tion companies (ARCs). Earlier, banks
sponses and oral submissions made ercise of powers vested in RBI under were barred from selling NPAs classi-
during the personal hearing, the RBI the provisions of Section 47 A (1) (c) fied as fraud, which had left them
determined that the aforementioned read with Section 46 (4) (i) and Section saddled with a resolution of several
charge was substantiated and war- 56 of the Banking Regulation Act, large accounts.
ranted the imposition of a monetary 1949," the RBI said. Banks are targeting to sell Rs 2 lakh
penalty," it said. crore worth of NPAs to the bad bank
The statutory inspection was by or the National Asset Reconstruction
Nabard on its financial position as on
RBI permits lenders to sell March 31, 2019 and the Inspection Company (NARCL) for recovery. How-
ever, they have hit a roadblock in re-
fraud loans to ARCs Report revealed that the bank had spect of accounts that have been clas-
opened branches without obtaining
The Reserve Bank of India has al- sified as fraud, as they were not al-
lowed lenders/banks to transfer of the prior permission of the RBI. lowed to sell them. RBI has now al-
loans that have been classified as Based on the same, a notice was is- lowed banks to sell fraud accounts,
fraud by these lenders to Asset Recon- sued to the bank advising it to show provided the transferee is not con-
struction Companies (ARCs). Stressed cause as to why penalty should not be nected to the borrower.

8 | 2021 | NOVEMBER | BANKING FINANCE