The Reserve Bank of India (RBI) imposed a monetary penalty on DCB Bank Limited. The action follows the Statutory Inspection for Supervisory Evaluation (ISE 2025) of the bank, which was conducted by the RBI with reference to its financial position as on March 31, 2025. The detailed breakdown of the compliance failures and subsequent insights are outlined below.
Key Details
| Bank Name | DCB Bank Limited |
| Penalty Amount | ₹29.60 lakh (Rupees Twenty Nine Lakh Sixty Thousand only) |
| Date of Order | February 06, 2026 |
| Statutory Provisions | Section 47A(1)(c) read with section 46(4)(i) of the Banking Regulation Act, 1949 |
| Violated Directions | Directions on loans extended against pledge of gold ornaments and jewellery for non-agricultural end uses |
Root Cause Analysis (RCA)
Based on the RBI’s supervisory findings and after considering the bank’s written replies and oral submissions during a personal hearing, the monetary penalty was warranted by the following sustained charge:
- LTV Ratio Breach: The bank failed to maintain the prescribed loan-to-value (LTV) ratio in certain non-agricultural gold loan accounts during the tenure of such loans.
Preventive Controls
To mitigate the risk of recurrence and strengthen systemic compliance regarding gold loans, the following operational controls are recommended:
- Automated LTV Monitoring Systems: Implement dynamic tracking within the loan management system that routinely checks daily gold price fluctuations against the outstanding balances of non-agricultural gold loans to ensure continuous margin compliance.
- Early Warning & Margin Calls: Institute automated alerts triggered when an account approaches the maximum permissible LTV threshold, initiating standardized protocols for margin calls or partial recovery before a regulatory breach occurs.
- Enhanced Periodic Audits: Mandate concurrent audits specifically targeting the valuation and continuous LTV maintenance of the gold loan portfolio to catch deviations at the branch level.
Lessons Learnt
- Continuous Lifecycle Compliance: LTV limits must be maintained continuously during the tenure of the loans, not merely at the time of sanction or disbursement. Active portfolio monitoring is critical.
- Separation of Compliance and Contract Validity: The regulatory action taken by the RBI addresses deficiencies in statutory compliance alone. It is not intended to pronounce upon the validity of any specific transaction or agreement entered into by the bank with its customers.
- Risk of Escalation: The imposition of this monetary penalty is explicitly without prejudice to any other action that the RBI may initiate against the bank, reinforcing the necessity for prompt and comprehensive remediation.