Reserve Bank of India (RBI) on Tuesday imposed a monetary penalty on ICICI and Kotak Mahindra Bank for not abiding by the former’s direction, informed officials on October 17.
ICICI Bank
In an official statement, the RBI said, “bank imposed a monetary penalty of Rs 12.19 crore on ICICI Bank Ltd. for contravention and non-compliance with the RBI directions on ‘Frauds classification and reporting by commercial banks and select Fls’.”
The central bank stated that the decision was “based on the deficiencies in regulatory compliance and was not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers”.
The bank has conducted examination of the Risk Assessment Reports/Inspection Reports pertaining to ISE 2020 and ISE 2021, and all related correspondence in that regard, revealed, inter alia, that the bank had
(i) sanctioned/committed loans to companies in which two of its directors were also directors
(ii) engaged and marketed in sale of non-financial product
(iii) on failing to report frauds to the central bank as per the rules
In consequence of which, 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 provisions.
Kotak Mahindra Bank
RBI also imposed a monetary penalty of Rs 3.95 crore on Kotak Mahindra Bank Limited for non-compliance with RBI directions. In this case, the bank imposed the penalty for non-compliance with RBI Directions on “Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks”, “Recovery Agents engaged by Banks”, “Customer Service in Banks”, and “‘Loans and Advances – Statutory and Other Restrictions’”.
(i) on failing to carry out annual review or due diligence of service provider
(ii) failed to ensure that customers are not contacted after 7 pm and before 7 am
(iii) levied interest from disbursement due date instead of the actual date of disbursement, contrary to the terms and conditions of sanction
(iv) levied foreclosure charges despite there being no clause in the loan agreement for levy of prepayment penalty on loans recalled/foreclosure initiated by the bank.