The Reserve Bank of India (RBI) has imposed a monetary fine on the public sector bank, Indian Overseas Bank (IOB), and the Non-Banking Finance Company (NBFC), Mahindra and Mahindra Financial Services Limited, for non-compliance with RBI directives.

In a directive issued on 26 April 2025, the RBI imposed a fine of Rs 63.60 lakh (Rupees Sixty three lakh sixty thousand) on Indian Overseas Bank and Rs 71.30 lakh (Rupees Seventy One Lakh Thirty Thousand) on Mahindra & Mahindra Financial Services Limited.

As the regulator of Banks and NBFCs, the RBI periodically audits the accounts of banks and NBFCS. In a recent audit, the RBI found that IOB and Mahindra & Mahindra Financial Services Limited did not comply with certain directions of the RBI.

Reason for the fine on IOB

The public sector bank, IOB, was fined Rs 63.60 lakhs for its non-compliance with RBI directives on loans to the Agricultural sector and Micro, Small, and Medium Enterprises (MSMES).

The non-compliance of the bank was in ;

Obtaining collateral security for agricultural loans up to Rs 1.60 lakh in certain cases and
Obtaining collateral security for loans up to Rs 10 lakh provided to certain Micro and Small Enterprise borrowers.

Collateral Free Loan

In India, an agricultural loan of up to Rs 2 lakh is collateral-free.

It was earlier Rs 1.60 lakh per loan, but from 1 January 2025, the collateral-free loan limit has been increased to Rs 2 lakh per loan.

MSME

In the MSME sector, loans up to Rs 10 lakhs are collateral-free.

Collateral means no security is provided against the loan by the borrower to the lender.

Reason for fine on Mahindra & Mahindra Financial Services Limited

The RBI found Mahindra & Mahindra Financial Services Limited guilty of:

Non-disclosure of the processing fees and other charges in certain loan application forms;
Failure to provide copies of the loan agreements and the loan details to certain borrowers.
Failure to provide a final chance to certain borrowers to repay the loans before the sale/auction of vehicles; and
Issuing multiple customer identification codes to certain customers, rather than a Unique Customer Identification Code (UCIC) for each customer.

About Indian Overseas Bank (IOB)

The IOB was founded as a private bank by an entrepreneur, Chidambaram Chettyar.

The bank began its banking operations with branches opened simultaneously in Chennai and Rangoon (now Yangon) in Burma.

The bank was nationalised in 1969.

It has overseas branches and offices in Singapore, Hong Kong, Thailand, and Sri Lanka.

Tagline: Good People to Grow With.

Headquarters: Chennai

Managing Director and CEO: Ajay Kumar Srivastava

About Mahindra and Mahindra Financial Services Limited

The company is part of the Mahindra Group and was established in 1991.

It is a non-banking financial company (NBFC) regulated by the Reserve Bank of India (RBI).

It offers vehicle loans, SME Finance, Personal Loans, etc

Headquarters: Mumbai

Managing Director and CEO: Raul Rebello