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The Reserve Bank of India has, in exercise of
powers vested in it under the provisions of Section 47A(1)(b) of the Banking
Regulation Act, 1949, imposed a penalty of Rs. 5.00 Lakh (Rupees Five Lakh only)
on the Tamilnad Mercantile Bank Ltd. The penalty has been levied for violation
of RBI regulations in not ensuring end-use of bank's funds lent to various borrowers
which was also facilitated by not ensuring diligent compliance with know your
customer (KYC) norms in opening the accounts.
The Reserve Bank had issued a show
cause notice to the bank. In response to its show cause notice, the bank
submitted a written reply. On a careful examination of the bank's reply, the
Reserve Bank found that as the violations were conclusively established, the
penalty was accordingly imposed.
Ajit Prasad
Manager
Press Release: 2005-2006/1377
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