RBI imposes monetary penalty on IndusInd Bank, Kotak Mahindra Bank

Our Bureau | | Updated on: Jul 04, 2022

Penalty for non-compliance with certain RBI directions

The Reserve Bank of India has imposed a monetary penalty of ₹1 crore on IndusInd Bank and of ₹1.05 crore on Kotak Mahindra Bank in two separate developments.

“The RBI has, by an order dated June 29, 2022, imposed a monetary penalty of ₹1 crore on IndusInd Bank for non-compliance with certain directions issued by RBI on ‘Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016’,” the RBI said on Monday.

In a separate statement, it said it has, imposed a monetary penalty of ₹1,05,00,000 on Kotak Mahindra Bank for contravention of the provisions of sub-section (2) of Section 26A of the Banking Regulation Act, 1949 (the Act) read with paragraph 3 of ‘The Depositor Education and Awareness Fund Scheme, 2014’ and for non-compliance with the directions on ‘Customer Protection – Limiting Liability of Customers in Unauthorised Electronic Banking Transactions’, and ‘Loans and Advances – Statutory and Other Restrictions’. 

The Statutory Inspection for Supervisory Evaluation (ISE) of Kotak Mahindra Bank was conducted by RBI with reference to its financial positions as on March 31, 2018 and March 31, 2019. 

The examination of the Risk Assessment Reports, Inspection Reports and all related correspondence revealed contravention of and non-compliance with the above-mentioned provisions of the Act and the directions issued by RBI, to the extent the bank failed to credit the eligible amount to the Depositor Education and Awareness Fund within the period prescribed, the RBI said.

It also failed to credit (shadow reversal) the amount involved in the unauthorised electronic transactions to the customers’ account within 10 working days from the date of notification by the customer, in certain cases, and maintain or apply margin on advances to stock brokers, the RBI said. 

“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 contravention of the provisions of the Act and failure to comply with the directions issued by RBI,” it further said.

After considering Kotak Mahindra Bank’s reply to the notice, oral submissions made in the personal hearing, and examination of additional submissions made by the bank, RBI came to the conclusion that the charges of contravention of and non-compliance were substantiated and warranted imposition of monetary penalty on the bank, it said.

IndusInd Bank:The Statutory Inspection for Supervisory Evaluation of IndusInd Bank was conducted by RBI with reference to its financial position as on March 31, 2020. 

Examination of the Risk Assessment Report, Inspection Report and all related correspondence revealed non-compliance with the directions issued by RBI to the extent the bank failed to adhere to Customer Due Diligence (CDD) procedure in the accounts opened using OTP based e-KYC, in non-face-to-face mode, as in certain accounts, the aggregate of all credits in a financial year, in all the deposits taken together, exceeded ₹2 lakh, and certain fixed deposit accounts were opened for amounts exceeding ₹1 lakh, of which some deposits were for more than ₹2 lakh. 

“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 directions issued by RBI,” the RBI said, adding that after considering the bank’s reply to the notice, oral submissions made during the personal hearing and examination of additional submissions made by it, RBI came to the conclusion that the charge of non-compliance with the RBI directions was substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with such directions

Published on July 04, 2022
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