The Reserve Bank of India (RBI) today penalised a small-sized private sector bank, Tamilnad Mercantile Bank, for not ensuring end-use of loans disbursed. RBI said the Tuticorin-based bank violated regulations on ensuring end-use of funds as it failed to comply with customer identification norms while opening the concerned borrowers' accounts. A penalty of Rs 5 lakh has been imposed on Tamilnad Mercantile Bank under the Banking Regulation Act, 1949. "The penalty has been levied for violation of RBI regulations in not ensuring end-use of the banks' 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 central bank said in a statement.The decision to levy penalty was taken after taking into consideration Tamilnad Mercantile Bank's response to a show cause notice.
