RBI slaps a combined Rs11-cr penalty on 7 state-run banks for flouting norms
05 August 2019
The Reserve Bank of India (RBI) has imposed monetary penalties totalling Rs11 crore on seven state-run banks for non-compliance with certain provisions of directions issued by RBI on reporting of fraud and other provisions related to opening and operating accounts.
These include violations related to the code of conduct for opening and operating current accounts, opening of current accounts by banks (need for discipline), discounting/ rediscounting of bills, frauds classification and reporting by commercial banks and select FIs, end use of funds monitoring and deposits on balance sheet date.
RBI has imposed penalties on Allahabad Bank (Rs2 crore), Bank of Baroda (Rs1.5 crore), Bank of India (Rs1.5 crore), Bank of Maharashtra (Rs2.0 crore), Indian Overseas Bank (Rs1.5 crore), Oriental Bank of Commerce (Rs1.0 crore) and Union Bank of India (Rs1.5 crore).
RBI said these banks have failed to adhere to the directions issued by RBI. “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 banks with their customers”, RBI added.
RBI said the action followed a scrutiny of the accounts of the companies of a group and it was observed that the banks had failed to comply with provisions of one or more of the directions issued by RBI. Based on the findings of the scrutiny, notices were issued to the banks advising them to show cause as to why penalty should not be imposed for non-compliance with the directions. After considering the replies received from the banks, oral submissions made in the personal hearings, where sought by the banks, and examination of additional submissions, if any, RBI came to the conclusion that the charges of non-compliance with RBI directions were sustained and warranted imposition of monetary penalty on aforementioned seven banks, based on the extent of non-compliance in each bank.
RBI also impose imposed monetary penalty of Rs1 crore on Corporation Bank for non-compliance with the directions issued by RBI on Cyber Security Framework in Banks and Frauds Classification and Reporting by commercial banks and select FIs.
RBI said a report of cyber security incident submitted by the bank about fraudulent transactions using a cancelled debit card revealed that the bank had failed to comply with the directions issued by RBI on Cyber Security Framework in Banks and Frauds Classification and Reporting by commercial banks and select FIs.