RBI imposes Rs7-cr fine on SBI for violation of norms
16 July 2019
Reserve Bank of India (RBI) has imposed Rs7 crore penalty on State Bank of India for non-compliance with the various directions on banking transactions issued by RBI.
SBI was found to have violated RBI norms on Income Recognition and Asset Classification (IRAC), code of conduct for opening and operating current accounts and reporting of data on Central Repository of Information on Large Credits (CRILC). The bank was also found to have violated norms on fraud risk management and classification and reporting of frauds.
This action is based on 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, RBI stated.
RBI said the action was taken after the statutory inspection of the bank with reference to its financial position as on 31 March 2017 revealed, inter alia, non-compliance with directions issued by RBI on IRAC norms, sharing of information about customers with other banks, reporting of data on CRILC, fraud risk management, and classification and reporting of frauds.
Based on the inspection report and other relevant documents, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for non-compliance with directions issued by RBI. After considering the bank’s reply and oral submissions made in the personal hearing, RBI came to the conclusion that the aforesaid charges of non-compliance with RBI directions were substantiated and warranted imposition of monetary penalty.
Reserve Bank of India had also (on 9 July 2019) imposed Rs10 lakh penalty on Union Bank of India (UBI) for non-compliance with the directions on cyber security framework in banks issued by RBI.
This action was based on deficiencies in regulatory compliance and was not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers, RBI stated.
RBI had carried out an examination of the cyber security framework of UBI based on reports of generation of seven fraudulent messages of a total value of $171 million through SWIFT system of the bank in 2016, which revealed several deficiencies. RBI had since issued a notice to the bank advising it to show cause as to why penalty should not be imposed on it for non-compliance with the extant directions. After considering the replies received from the bank, and submissions made during the personal hearing, RBI decided to impose the aforesaid monetary penalty, based on the extent of non-compliance and the corrective action taken by the bank.