On Wednesday, The Reserve Bank of India (RBI) imposed a fine of ₹25 lakh on Axis Bank Limited for not adhering to the rules.
The apex bank stated the reason for the penalty, it said the bank contravened the directions issued by RBI contained in the Reserve Bank of India – (Know Your Customer (KYC)) Direction, 2016.
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.
The penalty was levied by RBI in the exercise of its powers under section 47A(1)(c) and section 46(4)(i) of the Banking Regulation Act, 1949. (the Act).
Last year, the RBI conducted scrutiny of Axis Bank in a customer account held by the bank, and it was discovered that the bank had failed to follow the RBI’s instructions, according to the regulator.
“A scrutiny was carried out by RBI during February 2020 and March 2020 in a customer account maintained with the bank and it was observed that the bank had failed to comply with the aforesaid directions issued by RBI, ie., the bank failed to monitor/carry out on-going due diligence in the said account to ensure that the transactions were consistent with its knowledge about the customer, customer’s business and risk profile,” the RBI statement read.
“In furtherance to the same, a notice was issued to the bank advising it to show cause why penalty should not be imposed on it for contravention of the said directions, as stated therein,” the central bank said.
“After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of contravention of/non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with the aforesaid direction,” it added.
Prathamik Shikshak Sahakari Bank Ltd., Satara, Maharashtra
In the case of Prathamik Shikshak Sahakari Bank Ltd., Satara, Maharashtra a monetary penalty of ₹2.00 lakh is imposed on Prathamik Shikshak Sahakari Bank Ltd., Satara for contravention of/non-compliance with the directions issued by RBI on Exposure Norms and Statutory / Other Restrictions – UCBs.
This penalty was levied in the exercise of powers under Section 47 A (1) (c) with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949.
The inspection report of the bank based on its financial position as of March 31, 2019, revealed that the bank has not stuck to prudential inter-bank single counterparty limit among other things.
RBI asked the bank to state the reason why there should be no imposition of penalty. After taking into consideration the hearing, RBI concluded that the aforesaid charge of non-compliance with the RBI direction was proved and merited an imposition of monetary penalty.