The Reserve Bank of India (RBI) on Tuesday imposed a monetary penalty of ₹12.19 crore on ICICI Bank Ltd and ₹3.95 crore on Kotak Mahindra Bank Limited for non-compliance with certain banking regulatory norms.
“The ICICI Bank was penalized 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 circular read.
The apex bank said the ICICI Bank had sanctioned/committed loans to companies in which two of its directors were also directors. The bank had marketed and engaged in the sale of non-financial product, and failed to report the frauds to RBI within the prescribed timelines.
The Reserve Bank also imposed a monetary penalty of ₹3.95 crore on Kotak Mahindra Bank Limited for non-compliance with RBI 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 Kotak Mahindra Bank failed to carry out annual review or due diligence of the service provider, the RBI said in its circular.
The banking regulator said the bank levied interest from the disbursement due date instead of the actual date of disbursement, contrary to the terms and conditions of sanction, and levied foreclosure charges despite there being no clause in the loan agreement for levy of prepayment penalty on loans recalled/foreclosure initiated by the bank.
The RBI further said the Kotak Mahindra Bank also failed to ensure that customers are not contacted after 7 pm and before 7 am.
The RBI said the penalties against both banks are based on deficiencies in regulatory compliance and are not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers.