The Reserve Bank of India (RBI) on Tuesday imposed a fine of ₹12.19 crore on ICICI Bank for sanctioning loans to companies where two of its directors were also directors and for failing to Report fraud to the supervisory authority within the prescribed deadlines.
This came after the central bank conducted statutory inspections for prudential assessment of ICICI Bank with regard to its financial position as on March 31, 2020 and March 31, 2021. Audit of risk assessment reports revealed that the bank had sanctioned loans to companies in which two of its directors were also directors, marketed and sold non-financial products and failed to report fraud to the RBI within stipulated time frames, the banking regulator says.
Therefore, a notice was sent to the bank asking it to show reasons why it should not be penalized for non-compliance with the provisions of the Banking Regulation Act, the regulator said.
“After considering the Bank’s response to the notice, the oral submissions made during the personal hearing and additional submissions made by the Bank, the RBI concluded that the allegation of non-compliance with the provisions of the BR Act and the RBI instructions was well-founded “The Imposing a fine on the bank is justified,” the regulator said in a statement.
The central bank also imposed a fine of ₹3.95 crore on Kotak Mahindra Bank for non-compliance with RBI’s instructions on risk management and code of conduct in outsourcing of financial services by banks, collection agencies engaged by banks and customer service in banks others.
Inspections carried out by the RBI found that Kotak Mahindra Bank had failed to comply with its instructions as it had failed to carry out an annual review or due diligence on the service provider and ensure that customers did not arrive after 7pm and before 7am :00 p.m., contrary to the terms of the sanction, interest was charged from the due date of the withdrawal instead of the actual date of withdrawal and foreclosure fees were charged, although there was no clause in the loan agreement about charging prepayment penalty for withdrawn loans or foreclosure initiated by the bank.
According to RBI, this action is based on deficiencies in regulatory compliance and is not intended to reflect the validity of any transaction or agreement entered into by the bank with its customers.
These penalties come days after the RBI directed state-owned Bank of Baroda to stop onboarding customers on the mobile application ‘bob World’ with immediate effect. “Any further onboarding of customers of the bank under the bob World application is subject to rectification of the identified deficiencies and strengthening of the related processes by the bank to the satisfaction of the RBI,” the central bank said.
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