RBI Imposes Monetary Penalty on UCO Bank

Case Brief

The Reserve Bank of India imposed a monetary penalty on UCO Bank after finding contraventions of its instructions relating to opening of current accounts and providing bill discounting facilities. RBI said the bank discounted four letters of credit, credited the proceeds to current accounts of beneficiaries who had no borrowing facility with the bank, and transferred the funds to other group accounts, resulting in siphoning of funds. It also noted that the bank did not obtain no-objection certificates from the banks that had sanctioned regular credit facilities to those beneficiaries before opening the current accounts. The penalty was imposed under Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949.