RBI slaps Rs 3.95 cr fine on Kotak Mahindra Bank, Rs 12.19 cr on ICICI Bank

The Reserve Bank of India (RBI) on Tuesday imposed a penalty of Rs 3.95 crore on Kotak Mahindra Bank and Rs 12.19 crore on ICICI Bank for non-compliance with a few regulatory norms. Kotak Mahindra Bank was penalised for failing to conduct an annual review or due diligence of its service provider and for violation of contact hours with customers, the bank also faced criticism for charging interest from the disbursement due date rather than the actual disbursement date, which is against the terms of sanction, the central bank said in a statement. 

ICICI Bank, on the other hand, was penalised for committing loans to companies where two of its directors sat on the board, the bank also engaged in marketing and selling non-financial products and showed a negligent attitude towards reporting frauds to the RBI within the prescribed timeline.

The central bank considered these cumulative violations serious enough to impose administrative sanctions. "The penalty on ICICI Bank was imposed for contravention of sub-section (1) of Section 20 of the Banking Regulation Act, 1949 (the BR Act) read with directions issued by RBI on 'Loans and Advances-Statutory and Other restrictions', sub-section (2) of Section 6 and Section 8 of the BR Act read with directions issued by the RBI on ‘Financial Services provided by the Banks’, and non-compliance with the RBI directions on ‘Frauds classification and reporting by commercial banks and select Fls," the RBI said.

On Kotak Mahindra Bank, RBI said that the penalty had been imposed for non-compliance with official directions on "Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks", "Recovery Agents engaged by Banks", "Customer Service in Banks', and "Loans and Advances - Statutory and Other Restrictions".

The action is based on regulatory compliance problems and is not meant to rule on the legitimacy of any transaction or arrangement entered into by the two banks with their customers, according to the RBI.

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