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The Reserve Bank of India (RBI) has announced that it fined private sector banks Kotak Mahindra and IndusInd Bank for non-compliance with loans and KYC directives.
A Statutory Inspection for Supervisory Evaluation was conducted on both banks wherein an examination was conducted Risk Assessment Reports, Inspection Reports and all related correspondence pertaining to the same were inspected. The examination yielded the results in the following actions:-
- IndusInd Bank has been fined a sum of Rs 1 crores. The examination, which was conducted with reference to its financial position as of 31st March 2020, revealed that the bank failed to adhere to the Customer Due Diligence (CDD) procedure in the accounts opened using OTP-based eKYC. In certain accounts, the aggregate of all credits in a financial year, in all the deposits taken together, exceeded Rs 2 lakhs. Moreover, certain FD accounts were opened for amounts exceeding Rs 1 lakh, of which some deposits were for more than Rs 2 lakh.
- The RBI imposed a fine of Rs 1.05 crores on Kotak Mahindra Bank. In the examination, conducted in relation to the bank's financial position as of 31st March 2018 and 2019, the bank failed to credit the eligible amount to the Depositor Education and Awareness Fund within the prescribed time limit, credit the amount involved in the unauthorized electronic transactions to the customers' account within 10 days from the date of intimation by customer & maintain/apply margin on advances to stock brokers.
Both banks were sent a show-cause notice, asking them to explain why the bank shouldn't impose the aforesaid penalties on them for breaching the provisions of the relevant Act and failure to comply with RBI's directives.
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However, the Central Bank has clearly stated that the act of imposing a penalty on the banks is due to their regulatory non-compliance and does not 'pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.'
"After considering the 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 / non-compliance with the aforesaid provisions of the Act / RBI directions were substantiated and warranted imposition of monetary penalty on the bank, to the extent of contravention of / non-compliance with such provisions of the Act / RBI directions," RBI's press release said.
Monetary penalties were also imposed on Nav Jeevan Cooperative Bank Ltd., Balangir District Central Cooperative Bank Ltd, Dhakuria Cooperative Bank & Palani Cooperative Urban Bank Ltd.
Article by Aman Agarwal.
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