RBI's action against regulated entities rises even as amounts fall

According to Financial Stability Report, the enforcement action by the banking regulator increased to 161 entities in December 2023 - May 2024 from 146 entities in June 2023 - November 2023

Enforcement action by the Reserve Bank of India (RBI) against Regulated Entities (REs) increased by 10 per cent in the first half of 2024, but the aggregate penalty imposed on the entities has declined by nearly 60 per cent.

According to the Financial Stability Report (FSR), the enforcement action by the banking regulator increased to 161 entities from December 2023 to May 2024 and 146 entities from June 2023 to November 2023.

However, the aggregate penalty imposed by the banking regulator declined to Rs 22.83 crore from Rs 57.07 crore during this duration.

The monetary penalty was imposed citing non-compliance with or contravention of statutory provisions and or directions issued by RBI.

“Domestic regulatory initiatives continue to focus on the resilience of financial intermediaries, bolstering efficiency within financial markets, implementing global best practices, streamlining regulatory compliance processes, and enhancing customer protection measures,” said the banking regulator in its FSR report.

Between December 2023 to May 2024, RBI imposed a penalty on 4 public sector banks, 9 private sector banks, 1 small finance bank, 1 foreign bank, 2 regional rural banks.

The regulated entities also include 132 co-operative banks, nine Non-Banking Financial Companies, and three Housing Finance Companies.

From December 2022 to May 2023, the RBI imposed an aggregate penalty of Rs 26.34 crore on 122 REs.

Amid heightened uncertainty globally, policymakers have maintained the focus on enhancing the resilience of the financial system and consolidating the improvements in regulation and supervision.

According to RBI, global regulatory efforts are focused on mitigating risks that emerge from climate change, increased use of financial technology, and dealing with cyber threats.

The efforts are targeted at reinforcing the resilience of both traditional banking institutions and non-bank financial intermediaries.

“Regulators are consolidating the gains of the past while remaining vigilant in monitoring and adapting to the evolving financial landscape and making the financial system future- ready,” RBI added.