These actions on 4 coop banks are based on deficiencies in regulatory compliance
FinTech BizNews Service
Mumbai, March 14, 2024: The Reserve Bank of India (RBI) has, by separate orders in February 2024 and March 2024, imposed a monetary penalty on each of 2 banks and 1 NBFC. These actions on 3 entities are based on deficiencies in regulatory compliance, as per the press releases issued by the RBI on 13 March 2024.
RBI has imposed monetary penalty on Indostar Capital Finance, Bank of India and Bandhan Bank.
1 The Reserve Bank of India (RBI) has, by an order dated February 21, 2024, imposed a monetary penalty of ₹13.60 lakh (Rupees Thirteen lakh sixty thousand only) on Indostar Capital Finance Limited (the company) for non-compliance with the ‘Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016’ and 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 regulatory instructions 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 charges against the company were sustained warranting imposition of monetary penalty: the company i) did not put to use a robust software to give alerts for effective identification and reporting of suspicious transactions; ii) did not carry out periodic updation of KYC of its high risk customers, which were due for updation, as part of on-going due diligence of its customers; and iii) had delayed reporting of certain frauds above ₹1 lakh to RBI.
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.
2 The Reserve Bank of India (RBI) has, by an order dated February 26, 2024 imposed a monetary penalty of ₹1,40,76,000 (Rupees One Crore Forty Lakh Seventy Six Thousand only) on Bank of India (the bank) for non-compliance with certain directions issued by RBI on ‘Interest Rate on Deposits’, ‘Customer Service in Banks’, ‘Interest Rate on Advances’, ‘Central Repository of Information on Large Credits (CRILC) - Revision in Reporting’, and ‘Membership of Credit Information Companies (CICs)’ and contravention of provisions of Credit lnformation Companies Rules, 2006 (ClC Rules). 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 and section 25(1)(iii) read with section 23(4) of the Credit Information Companies (Regulation) Act, 2005.
Background
The Statutory Inspection for Supervisory Evaluation of the bank was conducted by RBI with reference to its financial position as on March 31, 2021 (ISE 2021) and March 31, 2022 (ISE 2022). Based on supervisory findings of non-compliance with regulatory instructions/ statutory provisions and related correspondence in that regard, a notice was issued to the bank 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 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) did not pay interest in certain term deposit accounts as per the schedule of interest rates disclosed in advance; (ii) had levied SMS alert charges from customers based on invalid mobile numbers and not on actual usage basis; (iii) failed to reset interest rates in MCLR and external benchmark linked advances at prescribed periodicity; (iv) failed to benchmark the interest on certain floating rate retail loans and floating rate loans to MSME, to an external benchmark rate; (v) failed to report or inaccurately reported data pertaining to certain large borrowers to CRILC and (vi) failed to furnish accurate information to Credit Information Companies (CICs).
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.
3 The Reserve Bank of India (RBI) has, by an order dated March 04, 2024, imposed a monetary penalty of ₹29.55 lakh (Rupees Twenty Nine Lakh Fifty-five Thousand only) on Bandhan Bank Ltd. (the bank) for non-compliance with certain directions on ‘Reserve Bank of India (Interest Rate on Deposits) Directions, 2016’. This penalty has been imposed in exercise of powers vested in RBI conferred under the provisions of section 47A(1)(c) read with section 46(4)(i) of the Banking Regulation Act, 1949.
The Statutory Inspection for Supervisory Evaluation (ISE 2022) of the bank was conducted by RBI with reference to its financial position as on March 31, 2022. Based on supervisory findings of non-compliance with regulatory instructions and related correspondence in that regard, a notice was issued to the bank 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 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 charge pertaining to opening of savings deposit account of an ineligible entity was sustained.
The above enforcement 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. Further, imposition of this monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank.
