RBI slaps Rs58.9 cr penalty on ICICI Bank for HTM non-compliance
29 March 2018
The Reserve Bank of India on Thursday imposed a penalty of Rs58.9 crore on ICICI Bank for non-compliance with directions issued by it on direct sale of securities from its Held to Maturity (HTM) portfolio and specified disclosure.
According to the central bank, the penalty was imposed because of the failure of ICICI Bank to adhere to its directions/guidelines. “This 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 bank with its customers,” said the RBI.
ICICI Bank said it gave “utmost importance to regulatory compliance and ensuring compliance with all directives, guidelines and observations by RBI.”
Clarifying on the matter, it said RBI guidelines require banks to classify investments into three categories - Held for Trading (HFT), Available for Sale (AFS) and Held to Maturity.
“The securities acquired by the banks with the intention to hold them till maturity can be classified under HTM,” said the bank. “If the value of sales of securities from HTM category exceeds 5% of the HTM investments, banks are required to disclose in the audited annual financial statements, the market value of the HTM investments and indicate the excess of book value over market value.”
RBI imposed a penalty on the bank for continued sale of government securities classified as HTM. The bank said it had continued with the sales from HTM category for a few weeks during the quarter ended March 31, 2017, due to a genuine misunderstanding on the timing of the applicability of RBI’s direction in the matter.
As per RBI guidelines, the bank had disclosed in its annual report for FY2017 that it had sold more than 5% of investments categorised as HTM. However, the bank had not made the specified additional disclosure at that time.
ICICI claims that it has subsequently been making the specified disclosure as directed by RBI in the audited financial results since the quarter ended June 30, 2017.
During the current year, the bank sold less than 5% of securities from its
HTM portfolio. “The bank would like to re-iterate that it continues to give utmost importance to regulatory compliance and endeavours to meet supervisory expectations,” said ICICI Bank.