These actions on the said 4 entities are based on deficiencies in regulatory compliance
FinTech BizNews Service
Mumbai, November 3, 2023: The Reserve Bank of India (RBI) has, by separate orders in October, 2023, imposed a monetary penalty on each of 2 banks and 2 NBFCs. These actions on the said 4 entities are based on deficiencies in regulatory compliance, as per the press releases issued by the RBI on 3 November 2023.
1 The Reserve Bank of India (RBI) has, by an order dated October 30, 2023, imposed a monetary penalty of Rs.10 lakh (Rupees Ten lakh only) on Mercedes-Benz Financial Services India Private Limited (formerly known as Daimler Financial Services India Private Limited) (the company) for non-compliance with certain provisions of the Reserve Bank of India (Know Your Customer (KYC)) Direction, 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.
This action is based on the 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.
Background
The statutory inspection of the company was conducted by RBI with reference to its financial position as on March 31, 2021 and examination of the Risk Assessment Report, Inspection Report, Supervisory Letter and all related correspondence pertaining to the same revealed, inter alia, that the company failed to carry out on-going due diligence of its customers, when it did not undertake the periodic updation of KYC of its high-risk customers as on March 31, 2021. Consequently, a notice was issued to the company advising it to show cause as to why penalty should not be imposed on it for failure to comply with the RBI directions, as stated therein.
After considering the company’s reply to the notice, additional submissions made by it and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty.
2 The Reserve Bank of India (RBI) has, by an order dated October 25, 2023, imposed a monetary penalty of Rs.13.38 lakh (Rupees Thirteen lakh and thirty eight thousand only) on Kosamattam Finance Limited, Kottayam (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”. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 25(1)(iii) read with Section 23(4) of the Credit Information Companies (Regulation) Act, 2005 (CIC (R) Act) and Section 58G (1)(b) read with Section 58B(5)(aa) of the Reserve Bank of India Act, 1934 (RBI Act).
This action is based on the 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.
Background
The statutory inspection of the company was conducted by RBI with reference to its financial position as on March 31, 2022 and examination of the Risk Assessment Report, Inspection Report, supervisory letter and all related correspondence pertaining to the same revealed, inter alia, that the company (i) did not submit credit information pertaining to gold loan accounts to Credit Information Companies and (ii) did not maintain LTV ratio of 75% in certain loan accounts, during the FY 2021-22. Consequently, a notice was issued to the company advising it to show cause as to why penalty should not be imposed on it for failure to comply with the RBI directions, as stated therein.
After considering the company’s reply to the notice, examination of additional submissions made by it and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty.
3 The Reserve Bank of India (RBI) has, by an order dated October 30, 2023, imposed a monetary penalty of Rs.30 lakh (Rupees Thirty lakh only) on Federal Bank Ltd. (the bank) for non-compliance with certain directions contained in ‘Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016’. This penalty has been imposed in exercise of powers vested in RBI conferred under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) of the Banking Regulation Act, 1949.
This action is based on the 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.
Background
A scrutiny of the bank was carried out by the RBI based on a complaint. The examination of scrutiny report and related correspondence in that regard, revealed, inter alia, non-compliance with the aforesaid directions by the bank, to the extent it issued some demand drafts, each for value of rupees fifty thousand and above, without incorporating the name of the purchaser on the face of it. Consequently, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for failure to comply with the said directions, as stated therein.
After considering the bank’s reply to the notice, and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty.
4 The Reserve Bank of India (RBI) has, by an order dated October 30, 2023, imposed a monetary penalty of Rs.72 lakh (Rupees Seventy Two lakh only) on Punjab National Bank (the bank) for non-compliance with certain provisions of ‘Reserve Bank of India (Interest Rate on Deposits) Directions, 2016’, ‘Reserve Bank of India (Interest Rate on Advances) Directions, 2016’ and ‘Master Circular on Customer Service in Banks’. This penalty has been imposed in exercise of powers vested in RBI conferred under the provisions of Section 47 A (1) (c) read with Sections 46 (4) (i) and 51(1) of the Banking Regulation Act, 1949.
This action is based on the 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.
Background
The Statutory Inspection for Supervisory Evaluation (lSE 2021) of the bank was conducted by RBI with reference to its financial position as on March 31, 2021. The examination of the Risk Assessment Report / Inspection Report pertaining to ISE 2021, and all related correspondence in that regard, revealed, inter alia, non-compliance with the aforesaid directions by the bank, to the extent it (i) levied SMS charges in certain accounts despite maintaining junk mobile numbers in the Core Banking Solution(CBS), (ii) did not pay interest rates strictly as per the schedule of interest rates disclosed in advance in several term deposit accounts, and (iii) failed to specify the interest reset date in MCLR-linked loans. Consequently, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for failure to comply with the said directions, as stated therein.
After considering the bank’s reply to the notice, and oral submissions made during the personal hearing, RBI came to the conclusion that the charges of non-compliance with the aforesaid RBI directions were substantiated and warranted imposition of monetary penalty.
