RBI penalizes Indusland Bank and imposes restrictions on Corporation Bank

The Reserve Bank of India has imposed a penalty of Rs. 3 crore on IndusInd Bank for not adhering to IRAC norms.
Indusland has been penalized for non-compliance of directions issued by the central bank on Income Recognition and Asset Classification (IRAC) norms and infringement of restrictions regarding extension of non-fund based facilities.

Although there would a negligible monetary impact of the penalty on the bank, the action might affect its valuation and raise suspicion about divergences committed by the bank. The penalty pertains to RBI's inspection of Indusland's finances as of the fiscal year 2016.

Undeterred by the development, the stock of Indusland Bank was trading at Rs. 1,645.90 per share, marginally up by 0.21 per cent at 10:50 hours on Thursday.

On the other hand, RBI has imposed restrictions on Corporation Bank as its NPAs crossed the 10 per cent mark. The Reserve Bank had placed the bank under Prompt Corrective Action (PCA) framework on December 7, informed the bank. RBI has initiated PCA due to bank's high exposure to non-performing loans and requirement to raise capital.

At 10:49 hours, the stock of Corporation Bank was trading at Rs. 39.70 per share, down nearly 2 per cent.