RBI Slaps Rs 1 Crore Fine On SBI For Fraud Reporting, Classification: Full Details
RBI has penalised State Bank of India (SBI) for non-compliance with some of its directions.
The bank has to pay a monetary penalty of Rs 1 crore.
The directions SBI has violated are those contained in ‘Reserve Bank of India (Frauds classification and reporting by commercial banks and select FIs) 2016.
The non compliance pertains to frauds classification and reporting by commercial banks and select financial institutions.
RBI said that its 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 had probed a customer account maintained with the bank which revealed non-compliance with the directions on reporting of fraud in the said account to RBI.
The non compliance in particular has to do with delay in reporting of fraud in the said account.
It also issued a notice to SBI asking it to “show cause why penalty should not be imposed on it”.
After reviewing SBI’s reply, it concluded that the charges it placed “was substantiated and warranted imposition of monetary penalty”.
The Enforcement Department is responsible for RBI’s enforcement operations.
It was established in April 2017 and made the distinction between enforcement action and the supervisory process.
The department identifies actionable violations from the inspection reports, risk assessment reports, and scrutiny reports.
What Happens Next
An Adjudication Committee then adjudicates the violations and determines the quantum of the penalty.
Finally, the penalty is announced in a press release by both RBI and the regulated entity.
The latter will then have to pay the penalty within a specific period.
Another Bank In Trouble
The SBI case coincides with another bank, Standard Chartered Bank, which was fined Rs 1.95 Crore.
It is accused of failing to report a cyber security incident.
This is an act of non-compliance of RBI directions on ‘Customer Protection – Limiting Liability of Customers in Unauthorised Electronic Banking Transactions’, ‘Cyber Security Framework in Banks’, ‘Credit Card Operations of banks’ and Code of Conduct in Outsourcing of Financial Services by banks’ among others.
RBI exercised its powers under the Banking Regulation Act, 1949 to impose the fine.
Same as with SBI, RBI’s actions are based on the accused’s non compliance and do not “pronounce upon the validity of any transaction or agreement entered into by the bank with its customers”.