Union Bank of India is fined Rs 1 crore by RBI for delay in fraud detection

The Reserve Bank of India has enforced a Rs 1 crore penalty on Union Bank of India for the bank's failure to detect and report fraud on time.

The penalty has been imposed under Banking Regulation Act by RBI, as one of the Apex Bank's authorized powers.

Reportedly, the RBI had issued a show cause notice to the Union Bank of India on January 15, 2018, which asked why a penalty not be imposed on Union Bank of India under the Act.

Following this the bank had replied to the regulator on February 1, preceded by representations on an oral submission during a personal hearing on April 14 before the Committee of Executive Directors of the RBI.

UBI said, “The reply, as well as oral submission made by the bank in the personal hearings and also additional documents furnished, have not been found adequate by RBI leading to the imposition of penalty of Rs 10 million,”

The bank also informed that the amount of the penalty is not material considering the size of the bank and it received communication from RBI on imposition on a penalty on 6 September.

Moreover, UBI said that it has taken necessary preventive measures and has implemented a comprehensive corrective action plan to strengthen internal controls and to ensure that such incidents do not recur.

On March Central Bureau of Investigation (CBI) registered a Rs1,394.43 crore bank fraud case against Hyderabad-based Totem Infrastructure Ltd on a complaint by state-run Union Bank of India. According to a report by Mint, Union Bank has alleged in its complaint that "the company had diverted funds by opening accounts outside the consortium and through payments of wages by showing excess expenditure and inflated stocks."

In the last few months the number of bank fraud cases has been accumulated following the Reserve Bank of India (RBI) directed banks to file complaints against blundering companies.