The Reserve Bank of India (RBI) has imposed fines of ₹12.19 Cr and ₹3.95 Cr on the Industrial Credit and Investment Corporation of India (ICICI) and Kotak Mahindra, respectively, for violations of banking regulations on October 17, 2023.
ICICI Bank Penalty Imposition
The Reserve Bank of India (RBI) imposed a ₹12.19 crore monetary penalty on ICICI Bank Ltd. This penalty was enforced due to violations of the Banking Regulation Act, 1949, and non-compliance with RBI directives on loans, advances, financial services, and fraud classification.
The RBI conducted Statutory Inspections for Supervisory Evaluation (ISE) in 2020 and 2021, assessing the bank’s financial position as of March 31, 2020 and March 31, 2021. Their examination of Risk Assessment and Inspection Reports revealed several issues, including the bank sanctioning loans to companies with common directors, engaging in non-financial product sales, and failing to report fraud within stipulated timelines.
Subsequently, the bank was issued a notice to explain why it should not be penalised for non-compliance with Banking Regulation Act (BR Act) provisions and RBI directives. After considering the bank’s response, oral submissions, and additional information, the RBI determined that the charges of non-compliance were valid and justified the imposition of a monetary penalty on the bank.
Kotak Mahindra Penalty Imposition
The RBI levied a ₹3.95 crore monetary penalty on Kotak Mahindra Bank Limited for breaching RBI directives related to outsourcing financial services, engaging recovery agents, customer service, and statutory restrictions on loans and advances. This penalty was imposed under the authority vested in the RBI by the Banking Regulation Act, 1949.
The apex bank conducted a Statutory Inspection for Supervisory Evaluation (ISE) in 2022, assessing the bank’s financial position as of March 31, 2022. During the examination of observations from the Risk Assessment Report related to ISE 2022, it was revealed that the bank had not complied with certain directions.
This non-compliance included failing to conduct annual reviews of service providers, contacting customers outside permissible hours, applying interest from the disbursement due date instead of the actual disbursement date, and imposing foreclosure charges without contractual provisions.
Consequently, the RBI issued a notice to the bank, requiring them to justify why a penalty should not be imposed for failing to adhere to these directions. After reviewing the bank’s response, additional information, and oral submissions during a hearing, the RBI concluded that the non-compliance was valid, leading to the imposition of a monetary penalty on the bank.
Note: It’s important to note that this action is a result of regulatory compliance shortcomings and does not question the validity of the bank’s customer transactions or agreements.
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