These actions on 3 entities are based on their deficiencies in regulatory compliance
FinTech BizNews Service
Mumbai, August 16, 2024: The Reserve Bank of India (RBI) has, by separate orders in August 2024, imposed a monetary penalty on. These actions on the concerned 3 entities are based on deficiencies in regulatory compliance, as per the press releases issued by the RBI on May 2, 2024.
RBI has imposed monetary penalty on Bank of Maharashtra; Hinduja Leyland Finance and Poonawalla Fincorp.
1 The Reserve Bank of India (RBI) has, by an order dated August 8, 2024, imposed a monetary penalty of Rs1,27,20,000/- (Rupees One Crore Twenty Seven Lakh and Twenty Thousand only) on Bank of Maharashtra (the bank) for non-compliance with certain directions issued by RBI on ‘Loan System for Delivery of Bank Credit’, ‘Cyber Security Framework in Banks’ and ‘Know Your Customer’. This penalty has been imposed in exercise of powers vested in RBI conferred under the provisions of section 47A(1)(c) read with sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949.
The Statutory Inspection for Supervisory Evaluation (ISE 2023) of the bank with reference to its financial position as on March 31, 2023 and Information Technology (IT) examination of the bank in May 2023 were conducted by RBI. Based on supervisory findings of non-compliance with RBI directions, and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why maximum penalty should not be imposed on it for its failure to comply with the said directions.
After considering the bank’s reply to the notice, oral submissions made during the personal hearing and examination of additional submissions made by it, RBI found, inter alia, that the following charges against the bank were sustained, warranting imposition of monetary penalty. The bank (i) failed to ensure that the minimum outstanding ‘loan component’ was, at least, the specified percentage of the sanctioned fund based working capital limit for certain borrowers, (ii) failed to implement fraud risk management system across all delivery channels (iii) had allotted multiple customer identification code to certain customers instead of a Unique Customer ldentification Code (UCIC) for each customer and (iv) had allowed operations in certain small accounts that did not meet the regulatory requirement.
The action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transactions or agreement entered into by the bank with its customers. Further, imposition of monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank.
2 The Reserve Bank of India (RBI) has, by an order dated August 08, 2024, imposed a monetary penalty of Rs4.90 lakh (Rupees Four Lakh Ninety Thousand only) on Hinduja Leyland Finance Limited (the company) for non-compliance with certain provisions of the Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of clause (b) of sub-section (1) of section 58G read with clause (aa) of sub-section (5) of section 58B of the Reserve Bank of India Act, 1934.
The statutory inspection of the company was conducted by RBI with reference to its financial position as on March 31, 2022. Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the company advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the instructions. After considering the company’s reply to the notice, oral submissions made during the personal hearing and examination of additional submissions made by it, RBI found, inter alia, that the following charge against the company was sustained, warranting imposition of monetary penalty. The company did not put into use a robust software to throw alerts when the transactions were inconsistent with risk categorization and updated profile of the customers, as part of effective identification and reporting of suspicious transactions.
This action is based on deficiency in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the company with its customers. Further, imposition of this monetary penalty is without prejudice to any other action that may be initiated by RBI against the company.
3 The Reserve Bank of India (RBI) has, by an order dated August 12, 2024, imposed a monetary penalty of Rs10.00 lakh (Rupees Ten Lakh only) on Poonawalla Fincorp Limited, Pune, Maharashtra (the company) for non-compliance with certain provisions of the ‘Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016’ issued by RBI, relating to ‘Fair Practices Code for NBFCs’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of clause (b) of sub-section (1) of section 58 G read with clause (aa) of sub-section (5) of section 58 B of the Reserve Bank of India Act, 1934.
The statutory inspection of the company was conducted by RBI with reference to its financial position as on March 31, 2022. Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the company advising it to show cause as to why maximum penalty should not be imposed on it for its failure to comply with the said directions. After considering the company’s reply to the notice, oral submissions made during the personal hearing and examination of additional submissions made by it, RBI found, inter alia, that the following charge against the company was sustained, warranting imposition of monetary penalty. The company charged interest on loans from dates prior to the dates of disbursal of these loans, which was contrary to the terms and conditions of the loans communicated to the customers.
This 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 company with its customers. Further, imposition of this monetary penalty is without prejudice to any other action that may be initiated by RBI against the company.
