New Delhi: On 13 March, 2024, the Reserve Bank of India (RBI) imposed a monetary penalty of Rs 1,31,80,000 on the Tamilnad Mercantile Bank Limited for non-compliance with certain directions issued by RBI on Interest Rate on Advances and Central Repository of Information on Large Credits (CRILC) – Revision in Reporting. The central bank shared information about the penalty in a press statement.
The penalty was imposed on the bank for failing to benchmark the interest rate on certain floating-rate loans to MSMEs to an external benchmark lending rate, adopting multiple benchmarks within the same loan category, failing to price certain floating-rate loans with reference to the actual benchmark rate applicable to those loans, and wrongly reporting external credit ratings of certain borrowers to CRILC.
On 31 March 2022, the RBI examined the operations of Tamilnad Mercantile Bank Limited and found that the bank had failed to comply with RBI directions and statutory provisions. Additionally, the bank had adopted multiple benchmarks in the same loan category, which resulted in higher interest rates for MSMEs.
The RBI has clarified that the penalty is not intended to pronounce upon the validity of any transactions or agreements that the bank has entered into with its customers. The penalty is also without prejudice to any other action that RBI may take against the bank.
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