The Reserve Bank of India (RBI) on Friday, November 24, imposed a penalty of Rs 5 crore on Citibank, Rs 4.34 crore on Bank of Baroda, and Rs 1 crore on Indian Overseas Bank (IOB) for non-compliance with norms.
“The Reserve Bank of India (RBI) has, by an order dated November 02, 2023, imposed a monetary penalty of Rs 5.00 crore on Citibank N.A. for contravention of Section 26A of the Banking Regulation Act, 1949 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’,” the RBI said in a statement.
It said an examination revealed Citibank (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.
The RBI separately conducted the Statutory Inspection for Supervisory Evaluation (ISE 2021) on Citibank and Bank of Baroda with reference to their financial position as on March 31, 2021. However, the Inspection on Indian Overseas Bank was conducted with reference to its financial position as on March 31, 2022.
On Bank of Baroda, the RBI imposed a Rs 4.34 crore fine “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′”.
Following an examination, the RBI revealed Bank of Baroda (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.
The Rs 1 crore penalty on Indian Overseas Bank has been imposed by the RBI “for non-compliance with certain directions issued by RBI on ‘Loans and Advances – Statutory and Other Restrictions'”.
An examination by the RBI on India Overseas Bank revealed (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.
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, it said.
Recently, the RBI also imposed Rs 90 penalty on Axis Bank and Rs 42.78 Lakh Fine on Manappuram Finance.
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