RBI Fines Union Bank of India ₹63.6 Lakh for Compliance Lapses in DEAF and Agri Loans

26 May 2025 , 10:40 PM

The Reserve Bank of India (RBI) has slapped a monetary penalty of ₹63.60 lakh on Union Bank of India for non-compliance with some of its instructions, including those on depositor services and agricultural finance.

The penalty was imposed in exercise of powers vested in RBI under the provisions of Section 26A of the Banking Regulation Act, 1949 read with RBI’s circular on ‘Credit Flow to Agriculture Collateral free agricultural loans (CFAL)’ dated May 23, 2007.

The action stems for the findings that came to the fore during RBI’s Statutory Inspections for Supervisory Purposes (ISSP) for the financial year ending March 2023 and March 2024. RBI noticed that Union Bank did not transfer the eligible unclaimed amounts to the Depositor Education and Awareness Fund (DEAF) within the prescribed time, violating the rules in force.

The bank had also availed collateral security for agricultural loans extending up to ₹1.6 lakh in certain cases, which was in contravention of RBI’s directives specifying that loans up to this limit are to be provided without any collateral.

RBI, however, did not raise questions against the bank’s customer-related transactions when it announced the penalty. This regulatory action comes just weeks after RBI had slapped a ₹1.66 lakh fine on Union Bank for procedural irregularity in soiled note remittance and ATM cash out transactions.

RBI’s recent MTM pan-India continues to highlight the regulator’s keen watch on compliance, governance and protection of depositor interests in the Indian banking sector. Central Bank of India has initiated enforcement against the lender for divergence in NPA reporting.

Union Bank of India is a big public sector bank in India, and such punishment will act as a strong reminder to follow regulatory guidelines especially around financial inclusion and transparency”.