RBI enforces Rs 14-crore penalty on 7 banks for flouting norms

The Reserve Bank of India has undertaken enforcement action against seven banks (including a payments bank and a cooperative bank) and has imposed an aggregate penalty of Rs 14.20 crore for a wide range of contraventions in the period between July 1, 2018 and October 31, 2018, according to the latest Financial Stability Report.

The enforcement action was initiated for non-compliance with/contravention of directions on fraud classification and reporting, discipline to be maintained while opening current accounts and reporting to the Central Repository of Information on Large Credits platform and Risk-Based Supervision; and violations of directions/guidelines on KYC norms. The action was also initiated for violation of Income Recognition and Asset Classification norms; delay in resolution of ATM-related grievances; violation of all-inclusive directions and non-compliance with specific direction prohibiting opening of new accounts.

During the period between July 1, 2017, and June 30, 2018, the Enforcement Department undertook action against 14 banks (including a payments bank and a small finance bank) and imposed an aggregate penalty of Rs102.40 crore.

With a view to separating the function of identification of contravention of respective statutes/ guidelines and directives by the regulated entities from imposition of punitive action and to make this process endogenous, formal and structured, a separate Enforcement Department was created within the Reserve Bank in April 2017.

To begin with, the department focussed on the enforcement of penalty provisions in case of commercial banks, under section 47A of the Banking Regulation Act. Enforcement of regulations pertaining to cooperative banks and non-banking financial companies, too, has been brought under the Department with effect from October 3, 2018.

The core function of the department is to enforce regulations and improve compliance, with the overall objective of ensuring financial system stability and promoting public interest and consumer protection.

Foreign banks

Meanwhile, the RBI has observed some deficiencies during its thematic study on operations of service centres/business process outsourcing subsidiaries of major foreign banks. Some of the concerns/ risks observed were that employees in the outsourced agency had the same access rights to the bank’s core banking solution (CBS). Further, it was also observed that user control-related activities such as password re-setting, access rights to bank’s applications and change request were handled by the outsourced agency.

The report said banks’ Service Level Agreements (SLAs) with their outsourced agencies did not recognise the Reserve Bank’s right to inspect the service provider of the banks and their books and accounts by one or more officers or employees or other persons.

People-risk was elevated on account of a significant amount of cost being incurred on outsourced services, the report added.

The RBI said the deficiencies observed were taken up with the respective banks for rectification.

Source-the hindu business line

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RBI imposes penalty on Federal Bank

Kerala-based Federal Bank was fined Rs 5 crore by the Reserve Bank of India (RBI) for not following procedures on reporting of data on large corporate loans, assessment of risk-based supervision (RBS) by RBI, know-your-customer norms and delay in compensation to customer complaints.

On September 25, RBI said it imposed a a monetary penalty of Rs 50 million (Rs 5 crore) on Federal Bank Ltd for for violation of Section 19(2) of Banking Regulation Act.

The penalty was for "non-compliance with the directions issued by RBI on (a) reporting of data on Central Repository of Information on Large Credits (CRILC), (b) reporting to RBI for assessment under RBS, (c) payment of compensation for delay in resolution of ATM-related customer complaints, and (d) Know Your Customer / Anti-money Laundering (KYC/AML) norms," RBI said in a statement on its website.

The central bank has been very active in penalising banks for non-compliance of several RBI rules with the major ones including violation of under-reporting or divergence in classification of non-performing assets (NPAs) and KYC norms.

This penalty has been imposed in exercise of powers vested in RBI under the provisions...of the Act, taking into account the failure of the bank to adhere to the aforesaid provision of the Act and the directions issued by 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 bank with its customers, RBI added.

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RBI imposes Rs 1 crore fine on PSBs for delay in fraud detection, reporting

The Reserve Bank of India has imposed a Rs 1 crore penalty on Union Bank of India for failing to detect and report fraud on time.

The central bank also imposed the same penalty on Bank of India and Bank of Maharashtra."This is to inform that Reserve Bank has imposed a penalty of Rs 10 million on the bank for delay in detection and reporting of fraud. The penalty has been imposed in exercise of powers vested in RBI under Banking Regulation Act," Union Bank of India said in a regulatory filing on Friday.

RBI had issued a show cause notice to the bank on January 15, 2018 asking why a penalty not be imposed on Union Bank of India under the Act. Subsequently, the bank had replied to the regulator on February 1, followed by representations on oral submission during personal hearing on April 14 before the Committee of Executive Directors of the RBI.

"The reply as well as oral submission made by the bank in the personal hearings and also additional documents furnished have not been found adequate by RBI leading to imposition of penalty of Rs 10 million," UBI said.However, the bank said that the amount of the penalty is not material considering the size of the bank. The bank further said it received communication from RBI on imposition on penalty on September 6.

The bank has taken necessary preventive measures and has implemented a comprehensive corrective action plan to strengthen internal controls and to ensure that such incidents do not recur, it added.

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RBI slaps Rs 3 crore penalty on IDBI bank

The Reserve Bank of India (RBI) imposed monetary penalty worth Rs. 3 crore on IDBI Bank for not complying with the outlined norms related to reporting of bad loans.

In an official notice, the RBI said the penalty was imposed on account of non-compliance with the directions issued on Income Recognition and Asset Classification (IRAC) norms.

"This penalty has been imposed in exercise of powers vested in the RBI under the provisions of Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949, taking into account failure of the bank to adhere to the aforesaid directions issued by the RBI," the notice read.

Furthermore, the central bank stated that this action is based on deficiencies in regulatory compliance, and not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

In May last year, the RBI had invoked prompt corrective action (PCA) on the state-owned Bank due to its bad loans and return on assets (ROA).

However, IDBI in a regulatory filing had stated that the action would not have any material impact on the performance of the bank, adding that it would contribute to improving internal monitoring and improve its activities.

On a related note, the RBI in May imposed a penalty of Rs. 589 million on ICICI Bank Limited for non-compliance with directions issued on direct sale of securities from its Held to Maturity (HTM) portfolio and specified disclosure in this regard. 

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