RBI imposes monetary penalty on Indian Overseas Bank

Case Brief

By an order dated September 29, 2025, RBI imposed a monetary penalty of ₹31.80 lakh on Indian Overseas Bank. The penalty was imposed under Section 47A(1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949, after supervisory inspection findings showed non-compliance with RBI directions on Priority Sector Lending (PSL) – Targets and Classification. RBI specifically sustained the charge that the bank collected loan-related charges in certain PSL accounts, each having sanctioned loan amount up to ₹25,000. RBI stated that the action is based on deficiencies in regulatory compliance and does not pronounce on the validity of any transaction or agreement with customers.