Tag Archives: monetary penalty

penalty on payment system operators

RBI has imposed huge penalties on two payment system operators viz. Rs.10 million penalty on Paytm Payments Bank limited for not disclosing proper information to the authorities as per section 26(2) of the Payment & Settlement Systems Act. Another penalty of Rs.27,78,750/- on Western Union Financial Services Inc. for non compliance with certain provisions of RBI Master Directions on Money Transfer Service Scheme (MTSS).

What exactly is the nature of non compliance in case of Western Union is not specified but newspaper reports suggest that it is for breaching the ceiling of 30 remittances per beneficiary in the last two years.

You can read the RBI press release here.

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52434

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penalty on SBI

RBI has imposed a monetary penalty of Rs.10 million on State Bank of India for non compliance with the directions contained in ‘Reserve Bank of India (Frauds classification and reporting by commercial banks and select FIs) directions 2016’

There is no clarity from RBI on what exact was the non compliance and for which the penalty is being levied. These kind of cryptic press releases are not helping the governance in the country.

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52425

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penalty on Standard Chartered Bank

RBI has levied a huge penalty of Rs.19.5 million on Standard Chartered Bank, India operations for non compliance with the directions issued by RBI on ‘Customer Protection – Limiting Liability of Customers in Unauthorised Electronic Banking Transactions’, ‘Cyber Security Framework in Banks’, ‘Credit Card Operations of banks’ read with ‘Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks’ and ‘Creation of a Central Repository of Large Common Exposures – Across Banks’ read with ‘Central Repository of Information on Large Credits (CRILC) – Revision in Reporting’. 

I wish RBI would be more specific as to the nature of non compliances. Their press releases are always bland to the point.

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52424

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penalty on Kurla Nagrik Sahakari Bank

RBI has imposed a penalty of Rs.100,000/- on The Kurla Nagarik Sahakari Bank Limited for violation of section 26A of the Banking Regulation Act, 1949 which relates to deposit of unclaimed deposits (unclaimed for 10 years) or amount in accounts which have not been operated upon for a period of 10 years.

RBI should stipulate that these co-operative banks should strengthen their compliance systems by taking on board the help of Company Secretaries. Read on.

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52412

he Reserve Bank of India (RBI) has imposed, by an order dated October 14, 2021, a monetary penalty of ₹1 lakh (Rupees One lakh only) on KNS Bank, The Kurla Nagarik Sahakari Bank Ltd., Mumbai (the bank) for contravention of Section 26-A read with section 56 of the Banking Regulation Act, 1949 (the Act), the Depositor Education and Awareness Fund Scheme, 2014 (the Scheme) framed under section 26 A of the Act. This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949 (the Act), taking into account the failure of the bank to adhere to the aforesaid directions issued by RBI.

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.

Background

The inspection report of the bank based on its financial position as on March 31, 2020, revealed, inter alia, that the bank had not transferred balances, in certain accounts which were unclaimed for more than ten years to Depositor Education and Awareness Fund. Based on the same, a Notice was issued to the bank advising it to show cause as to why penalty should not be imposed for non-compliance with and contravention of the provisions of the Act and the directions issued under the Act, as stated therein.

After considering the bank’s written reply to the Notice and oral submissions made during the personal hearing and subsequent additional submissions, RBI came to the conclusion that the aforesaid charge of non-compliance with RBI directions was substantiated and warranted imposition of monetary penalty.

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penalty on Sahyadri Sahakari Bank

RBI has imposed a penalty of Rs.300,000/- on The Sahyadri Sahakari Bank Limited for violation of section 26A of the Banking Regulation Act, 1949 which relates to deposit of unclaimed deposits (unclaimed for 10 years) or amount in accounts which have not been operated upon for a period of 10 years. Read on.

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52405

The Reserve Bank of India (RBI) has imposed, by an order dated October 13, 2021, a monetary penalty of ₹3.00 lakh (Rupees Three lakh only) on The Sahyadri Sahakari Bank Limited, Mumbai (the bank) for contravention of the provisions of Section 26A read with Section 56 of the Banking Regulation Act, 1949 (the Act), the Scheme framed thereunder and for contravention of /non-compliance with the directions issued by RBI contained in the Master Circular on Frauds – Classification and Reporting. This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Act, taking into account the failure of the bank to adhere to the aforesaid directions issued by RBI.

The 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.

Background

The inspection report of the bank based on its financial position as on March 31, 2019, revealed, inter alia, that the bank had (i) not transferred amount unclaimed in accounts for more than ten years to Depositor Education and Awareness Fund (DEA Fund) and (ii) had reported frauds to RBI with an inordinate delay. Based on the same, a Notice was issued to the bank advising it to show cause as to why penalty should not be imposed for non-compliance with and contravention of the provisions of the Act and the aforesaid directions, as stated therein.

After considering the bank’s reply to the Notice and oral submissions made during the personal hearing, RBI came to the conclusion that the aforesaid charges of non-compliance with and contravention of the provisions of the Act and RBI directions were substantiated and warranted imposition of monetary penalty.

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penalty on RBL Bank

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52301

RBI imposes monetary penalty on RBL Bank Limited of Rs.20 million on two counts of non compliance i.e. in not having a non interested Board of Directors u/s 10A(2)(b) of the Banking Regulation Act, 1949 and for violation of regulation 28(h) of the RBI (interest rate on deposits), directions, 2016 – in opening a savings deposit a/c in the name of entities other than individuals, karta of HUF and organisations/ agencies listed in Schedule I of those Directions.

Gist of the press release is given below:

The Reserve Bank of India (RBI) has, by an order dated September 27, 2021, imposed a monetary penalty of ₹2.00 crore (Rupees Two Crore only) on RBL Bank Limited (the bank) for contravention of section 28 (h) of the Reserve Bank of India (Interest Rate on Deposits) Directions, 2016 and for non-compliance with the provisions of clause (b) of sub-section (2) of section 10A of the Banking Regulation Act, 1949 (the Act). For the non-compliance with the provisions of section 10 A (2) (b) of the Act, penalty is also imposed for the period during which the contravention or default continued. This penalty has been imposed in exercise of powers vested in RBI under the provisions of section 47 A (1) (c) read with section 46 (4) (i) of the Act.

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.

Background

The Statutory Inspection for Supervisory Evaluation (ISE) of the bank was conducted by RBI with reference to its financial position as on March 31, 2019 (ISE 2019). The examination of the Risk Assessment Report and Inspection Report pertaining to ISE 2019, RBI letter dated October 27, 2020 and related correspondence in the matter, revealed, inter alia, contravention of the regulatory directions and non-compliance with the provisions of the Act, to the extent of (i) opening of five savings deposit accounts in the name of a co-operative bank and (ii) failure to comply with the provisions of section 10A(2)(b) of the Act relating to composition of Board of Directors. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for contravention of / non-compliance with the provisions of the directions/Act, as stated therein.

After considering the bank’s reply to the show cause notice, oral submissions made during the personal hearing and examination of additional submissions made by the bank, RBI came to the conclusion that the aforesaid charge of contravention of / non-compliance with the directions /Act were substantiated and warranted imposition of monetary penalty on the bank.

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penalty on Apna Sahakari Bank

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52291

The Reserve Bank of India (RBI) has, by an order dated September 23, 2021, imposed a monetary penalty of ₹79.00 lakh (Rupees seventy-nine lakh only) on Apna Sahakari Bank Ltd., Mumbai (the bank) for non-compliance with directions issued by RBI on ‘Income Recognition, Asset Classification, Provisioning and other related matters (IRAC norms)’, ‘Interest Rate on Deposits’ and ‘Maintenance of Deposit Accounts’. This penalty has been imposed in exercise of powers vested in RBI conferred under section 47 A (1) (c) read with sections 46 (4) (i) and 56 of the Banking Regulation Act, 1949, taking into account failure of the bank to adhere to the aforesaid directions issued by RBI.

This action is based on deficiency 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.

Background

The statutory inspection of the bank conducted by the RBI with reference to the bank’s financial position as on March 31, 2019, the Inspection Report pertaining thereto, and examination of all related correspondence revealed, inter alia, that the bank had not complied with the directions issued by RBI on NPA classification, payment of interest on deposits lying in current accounts of deceased individual depositors or sole proprietorship concerns while settling the claims and levying of penal charges in savings bank accounts for non-maintenance of minimum balances. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for contravention of aforesaid directions.

After considering the bank’s reply to the notice, additional submissions and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions were substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with the aforesaid directions.

AUTHORS NOTE: We have seen this kind of press releases almost every day, where RBI imposes monetary penalties on banks and FIs for non compliance with the extant regulations. Wondering why these banks are so lax in complying with the regulations. They should appoint Company Secretaries to handle their compliance functions either in house or outsourced to PCS.

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penalty on Axis Bank

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52161

The Reserve Bank of India (RBI) has imposed, by an order dated September 01, 2021, a monetary penalty of ₹25 lakh (Rupees Twenty five lakh only) on Axis Bank Limited (the bank) for contravention of/non-compliance with certain provisions of directions issued by RBI contained in the Reserve Bank of India – (Know Your Customer (KYC)) Direction, 2016. The penalty has been imposed in exercise of powers vested in RBI under provisions of section 47A(1)(c) read with section 46(4)(i) of the Banking Regulation Act, 1949 (the Act).

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.

Background

A scrutiny was carried out by RBI during February 2020 and March 2020 in a customer account maintained with the bank and it was observed that the bank had failed to comply with the aforesaid directions issued by RBI, ie., the bank failed to monitor/carry out on-going due diligence in the said account to ensure that the transactions were consistent with its knowledge about the customer, customer’s business and risk profile. In furtherance to the same, a notice was issued to the bank advising it to show cause why penalty should not be imposed on it for contravention of the said directions, as stated therein.

After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of contravention of/non-compliance with the aforesaid RBI directions were substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with the aforesaid direction.

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penalty on Bombay Mercantile

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52170

The Reserve Bank of India (RBI) has, by an order dated September 02, 2021, imposed a monetary penalty of ₹50 lakh (Rupees fifty lakh only) on Bombay Mercantile Co-operative Bank Ltd., Mumbai (the bank) for non-compliance with directions issued by RBI contained in in the Reserve Bank of India (Co-operative Banks – Interest Rate on Deposits) Directions, 2016 and specific directions dated March 05, 2018 and April 11, 2018 issued by RBI under the Supervisory Action Framework (SAF). This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949, taking into account failure of the bank to adhere to the aforesaid directions issued by RBI.

This action is based on deficiency 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.

Background

The statutory inspection of the bank conducted by the RBI with reference to the bank’s financial position as on March 31, 2019, the Inspection Report pertaining thereto, and examination of all related correspondence revealed, inter alia, that the bank had offered Interest rates on NRE deposits higher than those offered by it on comparable domestic rupee term deposits and had sanctioned unsecured advances, resulting in non-compliance with aforesaid directions issued by RBI. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for contravention of the directions issued by RBI.

After considering the bank’s reply to the notice and oral submissions made in the personal hearing, RBI came to the conclusion that the aforesaid charge of non-compliance with RBI directions was substantiated and warranted imposition of monetary penalty.

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penalty on Dhanalakshmi Bank

RBI has levied a penalty of Rs.2.75 million on The Dhanalakshmi Bank Limited for contravention of section 26A(2) of the Banking Regulation Act, 1949 – which mandates banks to transfer to the Depositor Education and Awareness Fund any amount which has not been operated upon for 10 years or more or any deposit which is unclaimed for more than 10 years.

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52096

The Reserve Bank of India (RBI) has imposed, by an order dated August 23, 2021, a monetary penalty of ₹27.50 lakh (Rupees Twenty Seven Lakh and Fifty Thousand only) on Dhanlaxmi Bank Ltd., Thrissur, Kerala (the bank) for contravention of sub-section (2) of section 26A of the Banking Regulation Act, 1949 (the Act) read with paragraph 3 of The Depositor Education and Awareness Fund Scheme, 2014 (the scheme) enclosed with RBI Circular on ‘The Depositor Education and Awareness Fund Scheme, 2014 – Section 26A of Banking Regulation Act, 1949- Operational Guidelines’ dated May 27, 2014. The penalty has been imposed in exercise of powers vested in RBI under the provisions of section 47 A (1) (c) read with section 46 (4) (i) of the Act.

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.

Background

The Statutory Inspection for Supervisory Evaluation (ISE) of the bank was conducted by RBI with reference to its financial position as on March 31, 2020, and the examination of the Risk Assessment Report and Inspection Report pertaining to the same, revealed, inter-alia, contravention of above-mentioned provisions of the Act read with the scheme. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for contravention of the provisions of the Act read with the scheme, as stated therein.

After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of contravention of aforesaid provisions of the Act read with the scheme was substantiated and warranted imposition of monetary penalty on the bank.

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penalty on Greater Bombay Bank

RBI imposed monetary penalty on The Greater Bombay Co-operative Bank Limited of Rs.2.5 million as per their press release issued yesterday.

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52057

The Reserve Bank of India (RBI) has, by an order dated August 12, 2021, imposed a monetary penalty of ₹25 lakh (Rupees twenty five lakh only) on The Greater Bombay Co-operative Bank Ltd., Mumbai, Maharashtra (the bank) for non-compliance with directions issued by RBI on ‘Frauds in UCBs: Changes in monitoring and reporting mechanism. This penalty has been imposed in exercise of powers vested in RBI under section 47 A (1) (c) read with sections 46 (4) (i) and 56 of the Banking Regulation Act, 1949.

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.

Background

The statutory inspection of the bank conducted by the RBI with reference to the bank’s financial position as on March 31, 2019, the Inspection Report (IR) pertaining thereto, and examination of all related correspondence revealed, inter alia, non-compliance with aforesaid directions issued by RBI. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for contravention of the directions issued by RBI. After considering the bank’s reply to the notice, oral submissions made in the personal hearing, RBI came to the conclusion that the aforesaid charges were substantiated and warranted imposition of monetary penalty.

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monetary penalties on insolvency professionals

IBBI has vide their circular dated 28th July, 2021 standardised the monetary penalties to be levied on insolvency professionals for various violations or breaches carried out them. The salient features are given below.

This comes into force with immediate effect.

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monetary penalty on mogaveera

RBI has vide its circular dated 21st June, 2021 levied a penalty of Rs.1.2 million on Mogaveera Co-operative Bank Limited for violation of provisions of section 26a and 56 of the banking regulation act, 1949 and also for non compliance of the provisions of directions issued by RBI on maintenance of deposit accounts and KYC provisions.

As usual RBI is very shy in giving more details of the non compliance for the general public to know.

Section 26A of BR act pertains to establishment of depositor education and awareness fund and it is not clear what provisions of section 56 has been violated.

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=51769

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monetary penalty on PNB, BOI

RBI has vide its press release levied monetary penalties of Rs.2 crores and Rs.4 crores each respectively on Punjab National Bank and Bank of India. 

For PNB it is relating to 

non-compliance of certain provisions of directions issued by RBI contained in the Master Directions on “Frauds – Classification and Reporting by commercial banks and select FIs” dated July 01, 2016 and, the circular on “Creation of a Central Repository of Large Common Exposures – Across Banks” dated September 11, 2013.

For Bank of India, it is relating to 

non-compliance with certain provisions of directions issued by RBI contained in the “Master Circular on KYC norms/AML standards/ CFT / Obligation of banks under PMLA, 2002” dated July 1, 2014, circular on “The Depositor Education and Awareness Fund Scheme, 2014 – Section 26A of Banking Regulation Act, 1949 – Operational Guidelines” dated May 27, 2014“Master Circular on Frauds – Classification and Reporting” dated July 02, 2012 and circular on “Sale of Financial Assets of Doubtful Standard / Fraudulent Origin to Securitization Company (SC) / Reconstruction Company (RC) – Reporting Requirements” dated April 5, 2011.

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monetary penalty on HDFC Bank

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=51650

RBI has imposed a monetary penalty of Rs.100 million for contravention of section 6(2) and 8 of the Banking Regulation Act, 1949. As usual the press release gives very scant details as to the non compliance involved.

Section 6(2) specifies that no banking company shall engage in any form of business other than that referred to in section 6(1).

Section 6(1) specifies what kinds of business that a banking company can carry out in India. It is a very inclusive definition leaving no scope for banking companies to do any other business other than those specified in this section.

Section 8 specifies that no banking company shall indulge in any buying or selling or bartering of goods or engage in any trade other than in connection with realisation of security held by it or in connection with bills of exchange received for collection or negotiation.

From newspaper reports, it appears that HDFC Bank has indulged in cross selling of products of third party in its auto loan section.

https://timesofindia.indiatimes.com/business/india-business/hdfc-bank-fined-rs-10-crore-by-rbi-in-car-loan-case/articleshow/83052541.cms

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