New Delhi, Sep 30 : The Reserve Bank of India (RBI) on Tuesday said it has imposed a penalty of Rs 31.8 lakh on Indian Overseas Bank for failing to follow certain rules related to 'Priority Sector Lending (PSL) - Targets and Classification'.

The central bank said that during its supervision, it found instances of non-compliance with PSL directions.

'The RBI has imposed a monetary penalty of Rs 31.80 lakh on Indian Overseas Bank for non-compliance with certain directions issued by RBI on 'Priority Sector Lending (PSL) ' Targets and Classification',' the central bank said.

'This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949,' it added.

Following this, a show cause notice was issued to the bank. After reviewing the bank's reply, additional submissions, and oral statements during a personal hearing, the RBI concluded that the charges were valid and decided to impose the penalty.

"After considering the bank's reply to the notice, additional submissions made by it and oral submissions made during the personal hearing, RBI found, that the following charge against the bank was sustained, warranting imposition of monetary penalty," RBI said.

According to RBI, Indian Overseas Bank had collected loan-related charges in some PSL accounts, even though the sanctioned loan amount in each of those accounts was up to Rs 25,000.

'The bank collected loan related charges in certain PSL accounts, each having sanctioned loan amount upto Rs 25,000,' the central bank said.

The regulator clarified that the penalty is only for deficiencies in compliance and does not affect the validity of any transaction or agreement between the bank and its customers.

'The action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers,' RBI said.

/IANS