ICICI Bank has been slapped with a ₹12.19 crore monetary penalty for sanctioning/committing loans to companies in which two of its directors were also directors, marketing and engaging in the sale of non-financial products, and failing to report frauds to RBI within the prescribed timelines, per a central bank statement.
The RBI also imposed a monetary penalty of ₹3.95 crore on Kotak Mahindra Bank (KMB) for failing to carry out the annual review and due diligence of the service provider and failing to ensure that customers are not contacted after 7 p.m. and before 7 a.m.
The central bank, in its statement, also underscored that KMB levied interest from the disbursement due date instead of the actual date of disbursement, contrary to the terms and conditions of sanction, and levied foreclosure charges despite there being no clause in the loan agreement for the levy of a prepayment penalty on loans recalled/foreclosure initiated by the bank.
In the case of ICICI Bank, RBI flagged contravention of certain sections of the Banking Regulation Act, 1949 (the BR Act) read with directions issued by the central bank on ‘Loans and Advances-Statutory and Other Restrictions’, on ‘Financial Services provided by the Banks’, and non-compliance with its directions on ‘Frauds classification and reporting by commercial banks and select Fls’.
This penalty comes even as ICICI Bank is trying to exorcise the scourge of the Central Bureau of Investigation’s charge that, under the then chief Chanda Kochhar, it sanctioned a ₹1,875 crore loan to the Videocon Group in violation of the lending policies.
Last year, the RBI imposed a monetary penalty aggregating ₹12.17 crore on seven private sector banks.
The last time that ICICI Bank faced such a steep penalty was in March 2018, when the RBI imposed a monetary penalty of ₹58.9 crore for non-compliance with its directions on the direct sale of securities from its HTM (held-to-maturity) portfolio and specified disclosure in this regard.
In the case of KMB, RBI flagged non-compliance with its 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’”.
In the case of both banks, the RBI said its 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 them with their customers.