RBI penalty on Fino Payments Bank: RBI imposes ₹29.6 lakh fine on Fino for violating end-of-day balance norms in customer accounts. Know the compliance rules and exam-relevant facts.
RBI Imposes ₹29.6 Lakh Penalty on Fino Payments Bank for Exceeding Regulatory Balance Limits
The Reserve Bank of India (RBI) has levied a fine of ₹29.6 lakh on Fino Payments Bank Ltd. after uncovering repeated violations of its licensing regulations. During the Statutory Inspection for Supervisory Evaluation (ISE 2024), conducted as of March 31, 2024, RBI discovered that Fino Payments Bank exceeded the regulated ceiling on end-of-day account balances several times
What Triggered the RBI Action?
The ISE 2024 supervisory audit revealed non-compliance with the licensing conditions specific to payments banks. Post-inspection, RBI issued a show-cause notice to the bank, requesting explanations. Despite reviewing Fino’s written responses and oral defenses, the central bank concluded that regulatory breaches had indeed occurred
Which Norms Were Violated?
Payments banks are authorized to offer financial services but operate under stringent rules—such as prohibiting lending and capping the maximum end-of-day balance (recently set at ₹2 lakh per customer). Fino Payments Bank breached this ceiling across multiple customer accounts
RBI’s Decision and Rationale
Invoking its authority under the Banking Regulation Act, 1949, RBI imposed a monetary penalty to uphold regulatory discipline. Importantly, the sanction is directed at compliance shortfalls and does not invalidate any of the bank’s customer transactions or contracts
Implications for Payments Banks
This penalty sends a warning to the rapidly growing payments bank sector: adherence to licensing conditions is non-negotiable. RBI continues to closely monitor such institutions to preserve the integrity of deposit-taking and financial inclusion initiatives.
🛑 Why This News Matters
1. Ensures Financial Discipline
By penalizing Fino, RBI reinforces that payments banks must operate within the limits defined in their licenses. This helps protect customer funds and maintains the soundness of the banking structure.
2. Sets Regulatory Precedents
This enforcement strengthens the RBI’s commitment to taking action against even smaller-scale entities, indicating zero tolerance for compliance violations.
3. Impact on Exam-Relevant Themes
For aspirants of banking, railway, defence, police, and civil service exams, this case exemplifies regulatory governance, statutory enforcement, compliance risk, and financial oversight.
4. Highlights Licensing Parameters
Understanding the unique constraints on payments banks—like balance caps and lending restrictions—is essential for banking-awareness segments in exams.
5. Strengthens Analytical Skills
By analyzing RBI’s procedural steps—inspection, notice, personal hearing, and penalties—students gain insight into regulatory due process, a key topic in governance modules.
📜 Historical Context
Payments Banks in India
Introduced in 2015, payments banks were launched to promote financial inclusion. They are restricted from granting loans or credit cards and have a maximum balance cap per customer (initially ₹1 lakh, now ₹2 lakh).
Previous RBI Actions
The RBI has penalized other fintech entities for compliance lapses—e.g., Paytm Payments Bank faced a ₹1 crore fine in 2021 for violating settlement guidelines The central bank frequently uses these actions to reinforce regulatory standards.
Strategic Rationale
The restrictions on payments banks are purposeful: they reduce systemic risk and direct the focus towards transactional banking rather than credit intermediation. RBI’s inspections and sanctions help maintain discipline in this niche sector.
Key Takeaways from RBI Fine on Fino Payments Bank
| S.No | Key Takeaway |
|---|---|
| 1 | RBI imposed a ₹29.6 lakh penalty on Fino Payments Bank for repeatedly breaching end-of-day balance ceiling |
| 2 | The infraction was identified during RBI’s ISE 2024, covering operations as of March 31, 2024 . |
| 3 | Payments banks must not exceed the end-of-day balance limit (₹2 lakh per customer) — a compliance requirement under their license . |
| 4 | RBI followed due process—issuing notices, reviewing responses, and granting hearings before finalizing the penalty . |
| 5 | The penalty targets regulatory non-compliance only; it does not affect the legitimacy of customer transactions . |
Frequently Asked Questions (FAQs)
1. What is the maximum balance allowed in a payments bank account in India?
As per current RBI guidelines, a customer can hold a maximum end-of-day balance of ₹2 lakh in a payments bank account.
2. Why did RBI impose a penalty on Fino Payments Bank?
RBI imposed a ₹29.6 lakh penalty on Fino Payments Bank for breaching the regulatory ceiling on end-of-day balances in customer accounts multiple times.
3. What are the restrictions on payments banks in India?
Payments banks cannot offer loans or issue credit cards. Their primary function is to provide basic banking services like deposits, remittances, and digital payments with a cap on account balances.
4. Does this RBI penalty affect Fino Payments Bank’s existing customers?
No. The RBI clarified that the penalty is for regulatory non-compliance and does not impact the validity of any transactions or contracts with customers.
5. What does RBI’s ISE (Inspection for Supervisory Evaluation) mean?
ISE is a periodic review conducted by RBI to assess the functioning, financial health, and compliance of banks and financial institutions.
6. What powers does the RBI have to penalize banks?
Under the Banking Regulation Act, 1949, RBI has the authority to inspect, supervise, and penalize banks for non-compliance with operational and regulatory norms.
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