On 17 October, the Reserve Bank of India (RBI) took action against two leading banks, Kotak Mahindra Bank and ICICI Bank, owing to the imposing monetary penalties for their regulatory non-compliance.
RBI Fines Kotak Mahindra Bank and ICICI Bank
In case of Kotak Mahindra Bank, it was fined ₹3.95 crore for failing to adhere to RBI’s guidelines on various aspects, including the ‘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.’
RBI reached this decision based on the findings from a Statutory Inspection for Supervisory Evaluation (ISE 2022), which exposed several areas of non-compliance.
This also included the bank’s neglect in conducting annual reviews of its service providers, contacting customers beyond permissible hours, and discrepancies in the application of interest and foreclosure charges.
Besides this, RBI also levied a ₹12.19-crore penalty on ICICI Bank Ltd for contravening Section 20 of the Banking Regulation Act, 1949, in conjunction with various directions on loans and advances, financial services, and fraud classification and reporting, in a separate move.
How Did This Happen?
The regulatory authority’s decision was affected by the findings during Statutory Inspections for Supervisory Evaluation (ISE 2020 and ISE 2021).
The findings reveal irregularities in loan sanctions, non-financial product marketing, and timely fraud reporting.
Further, these two penalties have been imposed in the exercise of powers vested in RBI conferred under the provisions of Section 47A(1)(c) of the Banking Regulation Act, 1949.
In the meantime the shares of Kotak Mahindra Bank Ltd ended at ₹1,771.50, up by ₹21.30, or 1.22%, on the BSE.
Similarly, the shares of ICICI Bank Ltd ended at ₹955.45, up by ₹4.40, or 0.46 percent, on the BSE.
