These actions on the 3 entities are based on deficiencies in regulatory compliance
FinTech BizNews Service
Mumbai, November 24, 2023: The Reserve Bank of India (RBI) has, by separate orders in October, 2023 and November, 2023, imposed a monetary penalty on 3 leading banks. RBI has imposed a monetary penalty on Bank of Baroda, Citibank N.A. and Indian Overseas Bank, as per the press releases issued by the RBI on November 24, 2023.
These actions on the said 3 entities are based on deficiencies in regulatory compliance.
1 The Reserve Bank of India (RBI) has, by an order dated November 02, 2023 imposed a monetary penalty of ?4.34 crore (Rupees Four crore and thirty four lakh only) on Bank of Baroda (the bank) for non-compliance with certain directions issued by RBI on ‘Creation of a Central Repository of Large Common Exposures - Across Banks’ dated September 11, 2013 read with ‘Central Repository of Information on Large Credits (CRILC) – Revision in Reporting’ dated February 13, 2014, ‘Loans and Advances – Statutory and Other Restrictions’, and ‘Reserve Bank of India (Interest Rate on Deposits) Directions, 2016’. This penalty has been imposed in exercise of powers vested in RBI conferred under the provisions of Section 47 A (1) (c) read with Sections 46 (4) (i) and 51(1) of the Banking Regulation Act, 1949.
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 (lSE 2021) of the bank was conducted by RBI with reference to its financial position as on March 31, 2021.The examination of the Risk Assessment Report / Inspection Report pertaining to ISE 2021, and all related correspondence in that regard, revealed, inter alia, non-compliance with the aforesaid directions by the bank, to the extent it (i) failed to ensure accuracy and integrity of data on large exposures submitted to RBI with respect to some accounts, (ii) sanctioned a term loan to a Corporation (a) in lieu of or to substitute budgetary resources envisaged for certain projects; (b) without undertaking due diligence on the viability and bankability of the projects to ensure that revenue streams from the projects were sufficient to take care of the debt servicing obligations; and (c) the repayment / servicing of which was made out of budgetary resources, (iii) sanctioned a working capital demand loan to a Corporation against amounts receivable from government by way of subsidies, and (iv) did not pay interest rate on the deposits accepted from senior citizens, as per the schedule of interest rates disclosed in advance. Consequently, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for failure to comply with 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 non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty.
2 The Reserve Bank of India (RBI) has, by an order dated November 02, 2023, imposed a monetary penalty of ?5.00 crore (Rupees Five crore only) on Citibank N.A. (the bank) for contravention of Section 26A of the Banking Regulation Act, 1949 (the BR Act) read with Paragraph 3 of ‘The Depositor Education and Awareness Fund Scheme, 2014 – Section 26A of Banking Regulation Act, 1949 – Operational Guidelines’, Section 10(1)(b)(ii) of the BR Act, and non-compliance with RBI Directions on ‘Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks’ read with ‘Reserve Bank of India (Know Your Customer (KYC)) Direction, 2016’. This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47A(1)(c) read with Section 46(4)(i) of the BR 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 2021) of the bank was conducted by RBI with reference to its financial position as on March 31, 2021. The examination of the Risk Assessment Report/Inspection Report pertaining to ISE 2021, and all related correspondence in that regard, revealed, inter alia, contravention of the aforementioned provisions of the BR Act and non-compliance with the aforesaid directions by the bank to the extent it (i) failed to credit the eligible amount to Depositor Education and Awareness Fund within the prescribed time period, (ii) paid remuneration in the form of commission to its certain staff members, and (iii) outsourced monitoring and disposal / closure (decision making function) of AML (Anti-Money Laundering) alerts to a Group company. Consequently, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for failure to comply with the said direction, as stated therein.
After considering the bank’s reply to the notice, additional information provided by the bank, and the oral submissions made during the personal hearing, RBI came to the conclusion that the aforesaid charge of contravention of the provisions of the BR Act and non-compliance with RBI directions was substantiated and warranted imposition of monetary penalty.
3 The Reserve Bank of India (RBI) has, by an order dated October 31, 2023, imposed a monetary penalty of ?1.00 Crore (Rupees One crore only) on Indian Overseas Bank (the bank) for non-compliance with certain directions issued by RBI on ‘Loans and Advances – Statutory and Other Restrictions’. This penalty has been imposed in exercise of powers vested in RBI conferred under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949.
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 2022) of the bank was conducted by RBI with reference to its financial position as on March 31, 2022. The examination of the Risk Assessment Report/Inspection Report pertaining to ISE 2022, and all related correspondence in that regard, revealed, inter alia, non-compliance with the aforesaid directions by the bank, to the extent it sanctioned (1) term loans to two Corporate entities (i) in lieu of or to substitute budgetary resources envisaged for certain projects; (ii) without undertaking due diligence on the viability and bankability of the projects to ensure that revenue streams from the projects were sufficient to take care of the debt servicing obligations; and (iii) the repayment/servicing of which was made out of budgetary resources, and (2) a term loan to another Corporate entity (i) without undertaking due diligence on the viability and bankability of the projects to ensure that revenue streams from the projects were sufficient to take care of the debt servicing obligations; and (ii) the repayment/servicing of which was made out of budgetary resources. Consequently, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for failure to comply with the directions issued by RBI, as stated therein.
After considering the bank’s reply to the notice and oral submissions made by it during the personal hearing, RBI came to the conclusion that the aforementioned charge of non-compliance was substantiated and warranted imposition of monetary penalty.
