The Reserve Bank of India (RBI) announced on April 5 that it has imposed a monetary penalty of Rs 1 crore on IDFC First Bank for breaching regulations. The penalty comes as the bank failed to comply with specific directives issued by the RBI regarding ‘Loans and Advances – Statutory and Other Restrictions’, as stated in a press release by the central bank. IDFC First Bank had approved term loans for a public sector undertaking to fund infrastructure projects without conducting adequate due diligence on project viability and bankability. This oversight led to doubts regarding whether the revenue generated from the projects would be adequate to cover debt servicing obligations. The RBI clarified that the penalty is a result of regulatory compliance shortcomings and does not imply judgment on the validity of any transactions or agreements made by the bank with its customers.
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