RBI fines TMB & DCB bank for violation of regulatory norms

The banking sector regulator, the Reserve Bank of India (RBI), on 19 March 2024, fined the Indian private sector bank Tamilnad Mercantile Bank Limited (TMB )

and the foreign bank DCB India for violating the RBI's regulatory norms.

Fine on Tamilnad Mercantile Bank Limited

The Tamilnad Mercantile Bank Limited was fined Rs 1.38 crore. According to the RBI, the Tamilnad Mercantile Bank Limited failed to:

• benchmark the interest rate on certain floating rate loans to Micro, Small and Medium Enterprises( MSMEs) to an external benchmark lending rate;
• adopted multiple benchmarks within the same loan category;
• failed to price certain floating rate loans with reference to the actual benchmark rate applicable to those loans and 
• wrongly reported external ratings of certain borrowers to CRILC(Central Repository of Information on Large Credit).

Fine on DCB Bank

The DCB was fined Rs 63.6 lakh. According to the RBI, the DCB Bank failed to 

• reset the interest rates at the prescribed periodicity in certain MCLR(Marginal Cost of Fund-based Lending Rates)-linked floating rate advances:
• benchmark the interest rate of certain floating-rate retail loans and floating-rate loans to MSMEs to an external benchmark lending rate.

RBI’s Power to Fine Bank 

• The Reserve Bank of India regulates banks in India. It has the power to fine banks under section 47 A (1) (c), read with sections 46 (4) (i) of the Banking Regulation Act, 1949.
• The Banking Regulation Act of 1949 also makes the RBI the Regulator and Supervisor of the scheduled commercial banks.
• Under the Supervision power, the RBI has the power to audit the financial accounts of these banks.
•  During these routine audits, the RBI found deficiencies in the service of these banks.

Tamilnad Mercantile Bank 

• The Tamilnad Mercantile Bank (TMB) was set up as the Nadar Bank Limited on May 11 1921.The Nadar business community of Tamilnadu set it up.
• The Bank became a scheduled commercial bank under the Reserve Bank of India Act, in 1935. 
• The bank's name was changed to Tamilnad Mercantile Bank in 1962.
• The bank has 548 branches across India, out of which 467 branches are located in rural, semi-urban and urban (non-metro) centres.

Managing Director and Chief Executive Officer: Thiru S.Krishnan

Headquarters: Thoothukudi, Tamil Nadu

Tagline: Totally Motivated Bank 

DBS Bank India

• DBS Bank is a subsidiary of Singapore’s DBS Bank. It started operating in India by establishing a representative office in 1994. 
• It established its first branch in India in 1995. 
• At present, it has 25 branches in India.

Managing Director and Chief Executive Officer: Surojit Shome

Headquarters: Mumbai, Maharashtra

Tagline: Live More, Bank Less