Reserve Bank of India (RBI) has imposed monetary penalties on Federal Bank (₹5.72 crore), Bank of India (₹70 lakh), and Dhani Loans and Services (₹7.60 lakh).

The central bank said it imposed monetary penalty on Federal Bank for non-compliance with the provisions of ‘Reserve Bank of India (Financial Services provided by Banks) Directions, 2016,’

The RBI, in a statement, noted that its inspection findings (with reference to the bank’s financial position as on March 31, 2020) revealed, inter alia, non-compliance with the aforesaid directions to the extent the private sector bank failed to ensure that no incentive (cash or non-cash) was paid to its staff engaged in insurance broking/ corporate agency services by the insurance company.

In furtherance to the same, 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 said directions.

“After considering the bank’s reply to the notice and oral submissions made in the personal hearing, the RBI came to the conclusion that the aforesaid charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with such directions,” per the statement.

The RBI imposed monetary penalty on BoI for non-compliance with certain provisions of the ‘Reserve Bank of India – (Know Your Customer (KYC)) Direction, 2016’ and circular instructions on ‘Compliance Function in Banks.’

The central bank observed that its inspection findings (with reference to the bank’s financial position as on as on March 31, 2019) revealed, inter alia, non-compliance with the aforesaid directions to the extent the bank failed to allot Unique Customer Identification Code (UCIC) to a large number of customers, and failed to complete the process even within extended timelines.

In furtherance to the same, a notice was issued to the public sector bank advising it to show cause as to why penalty should not be imposed on it for failure to comply with the said directions.

After considering the bank’s reply to the notice and oral submissions made in the personal hearing, the RBI came to the conclusion that the charge of non-compliance with the aforesaid directions was substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with such directions, according to the central bank.

The central bank said it imposed monetary penalty on Dhani Loans and Services Limited, Gurugram, for non-compliance with the ‘Reserve Bank of India (Know Your Customer) Directions, 2016.’

The RBI, in a statement, noted that its inspection findings (with reference to the bank’s financial position as on March 31, 2020) revealed, inter alia, non-compliance with the aforesaid directions to the extent of the company’s failure to ensure categorization of customers based on risk assessment and risk perception.

In furtherance to the same, a notice was issued to the company advising it to show cause as to why penalty should not be imposed on it for failure to comply with the RBI directions, as stated therein.

“After considering the company’s reply to the notice and examination of additional submissions made by it, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty,” said the RBI.

In all the three aforementioned cases, the central bank observed that its action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the entities with their customers.

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