Tag: penalty

RBI adds ‘displeasure’ notes to regulatory action against banks, BFSI News, ET BFSI

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Along with taking penal action against banks, the Reserve Bank is making its displeasure over their functioning known to them.

The central bank has been issuing ‘displeasure’ letters to expressing dissatisfaction over their functioning, according to a report. These letters are issued by the Department of Supervision, which does not take any enforcement action.

The intent of these letters is not to interfere in the functioning of the banks, but to suggest changes that are deemed necessary for course correction. The letters have had the desired effect and prod the boards to make necessary changes.

Regulatory action

The Reserve Bank of India (RBI) took enforcement action against 41 regulated entities by imposing an aggregate penalty of Rs 61.15 crore between July 1, 2019, and June 30, 2020, the bank said in its annual report.

The actions were taken against regulated entities for non-compliance of various regulations, the RBI said in its annual report. Enforcement actions were also undertaken against contravention of the directions pertaining to third-party account payee cheques; non-compliance with directions contained in risk mitigation plan (RMP); and failure to comply with the provisions of Section 10B of the Banking Regulation Act, 1949, among others.

The RBI undertook enforcement action and imposed fine for non-submission of compliance to risk assessment reports’ (RAR) findings; non-compliance with/ contravention of directions on fraud classification and reporting; not adhering to discipline while opening current accounts, etc.

As many as 26 penal actions were taken against public sector banks with an aggregate fine of Rs 38.35 crore, while eight were initiated against private sector banks with an aggregate fine of Rs 8.55 crore. With regard to cooperative banks, it said 13 penal actions were taken with imposition of Rs 9.18 crore, it said. During the period, it said, a total fine of Rs 5 crore were imposed on two foreign banks.



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RBI imposes Rs 15 lakh penalty on Baghat Urban Co-operative Bank, Solan, BFSI News, ET BFSI

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The RBI on Wednesday said it has imposed a penalty of Rs 15 lakh on The Baghat Urban Co-operative Bank Limited, Solan, for violation of certain norms, including, those related to NPA classification. In another statement, the RBI said it has imposed a penalty of Rs 1 lakh on Delhi Nagrik Sehkari Bank Limited, New Delhi, for non-compliance with certain directions issued by the central bank.

The RBI said inspection report of The Baghat Urban Co-operative Bank, based on its financial position as on March 31, 2019, revealed non-adherence with/violation of directions, including non-identification of NPAs, wrong classification of assets, inadequate provisions made due to wrong classification of assets and non-adherence to exposure norms for housing, real estate and commercial real estate (CRE).

A notice was issued to the bank to show cause as to why a penalty should not be imposed for violation of the said directions.

The Reserve Bank of India (RBI) said after considering the bank’s reply and oral submissions, it came to the conclusion that the charges were substantiated and warranted imposition of monetary penalty.

The inspection report of Delhi Nagrik Sehkari Bank, based on its financial position as on March 31, 2019, revealed non-adherence with prudential inter-bank (gross) exposure limit, RBI said.

For both cases, the RBI said the penalties are based on deficiencies in regulatory compliance and are not intended to pronounce upon the validity of any transaction or agreement entered into by them with their customers.



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RBI imposes Rs 27.5 lakh penalty on Dhanlaxmi Bank, Rs 20 lakh on a co-op bank, BFSI News, ET BFSI

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The RBI on Monday said it has imposed a penalty of Rs 27.5 lakh on Dhanlaxmi Bank, Thrissur, for contravention of certain norms related to the ‘Depositor Education and Awareness Fund Scheme’.

The banking regulator also imposed a Rs 20 lakh penalty on the NE & EC Railway Employees’ Multi-State Primary Cooperative Bank, Gorakhpur, for deficiencies in regulatory compliance.

In a statement, the RBI said penalty on Dhanlaxmi Bank has been imposed for contravention of a section of the Banking Regulation Act, 1949 read with a paragraph of The Depositor Education and Awareness Fund Scheme, 2014 (the scheme).

The RBI said the Statutory Inspection for Supervisory Evaluation (ISE) of the bank was conducted with reference to its financial position as on March 31, 2020, and the examination of the Risk Assessment Report and Inspection Report pertaining to the same, revealed, inter-alia, contravention of the provisions of the Act read with the scheme.

A notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for contravention.

“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 aforesaid provisions of the Act read with the scheme was substantiated and warranted imposition of monetary penalty on the bank,” it said.

In another statement, the RBI said the inspection report of the NE & EC Railway Employees’ Multi-State Primary Co-operative Bank based on its financial position as on March 31, 2019 revealed non-adherence/violation of specific directions issued to it under the Supervisory Action Framework (SAF).

In both cases, the RBI said, the penalty is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers.



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RBI slaps ₹1 crore penalty on Coöperatieve Rabobank U.A.

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The Reserve Bank of India imposed a monetary penalty of ₹1- crore on Coöperatieve Rabobank UA. Its Mumbai Branch is a part of the Netherlands-based Rabobank Group.

The penalty has been imposed for contravention of Section 11 (2) (b) (ii) of the Banking Regulation Act, 1949, and Reserve Bank directions on Sections 17(1) and 11(2)(b)(ii) of Banking Regulation Act, 1949 – Transfer to Reserve Funds, the Central bank said in a statement.

Also read: Strengthen systems to monitor availability of cash, RBI to banks, White Label ATM operators

The Central bank said, “The statutory inspection for supervisory evaluation (ISE) of the bank was conducted by RBI with reference to its financial position as of March 31, and the examination of the risk assessment report pertaining to the same revealed, inter alia, contravention of the above-mentioned provisions of the Act and the directions issued by the RBI.

“In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for contravention of the provisions of the Act and the RBI directions, as stated therein,” the statement added.

Also read: Data localisation – protection or protectionism?

After considering the bank’s reply to the notice, oral submissions made during the personal hearing and examination of additional submissions made by the bank, RBI came to the conclusion that the charge of contravention of aforesaid provisions of the Act and RBI directions was substantiated and warranted imposition of monetary penalty on the bank, the statement said.

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RBI slaps ₹1-cr penalty on Cooperatieve Rabobank U.A.

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The Reserve Bank of India imposed a monetary penalty of ₹1-crore on Cooperatieve Rabobank UA

Coöperatieve Rabobank UA, Mumbai Branch, is a part of the Netherlands-based Rabobank Group.

The penalty has been imposed for contravention of Section 11 (2) (b) (ii) of the Banking Regulation Act, 1949, and Reserve Bank directions on Sections 17(1) and 11(2)(b)(ii) of Banking Regulation Act, 1949- Transfer to Reserve Funds, the central bank said in a statement.

The central bank said, “The statutory inspection for supervisory evaluation (ISE) of the bank was conducted by RBI with reference to its financial position as of March 31, and the examination of the Risk Assessment Report pertaining to the same revealed, inter-alia, contravention of above-mentioned provisions of the Act and the directions issued by the RBI.

“In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for contravention of the provisions of the Act and the RBI directions, as stated therein”, the statement added.

After considering the bank’s reply to the notice, oral submissions made during the personal hearing, and examination of additional submissions made by the bank, RBI came to the conclusion that the charge of contravention of aforesaid provisions of the Act and RBI directions was substantiated and warranted imposition of monetary penalty on the bank, the statement said.

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ATM companies wary of RBI’s Rs 10,000 cash-out fine, BFSI News, ET BFSI

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MUMBAI: There is a mixed reaction to the move by the Reserve Bank of India (RBI) to penalise banks Rs 10,000 for each instance of an ATM being out of cash for 10 hours. ATM operators (known in the industry as managed service providers, or MSPs) and cash-in-transit companies are throwing up their hands, stating that they will not bear the penalty.

In a circular to banks this week, the RBI said that they should monitor the availability of cash in ATMs and ensure that there are no cash-outs. The circular said that banks would be fined Rs 10,000 if there is a cash-out at any ATM for more than 10 hours in a month.

“There are certain locations where ATMs run out of cash within hours of being loaded. These machines may not become feasible to operate if there is a penalty every month,” said a senior executive in an MSP firm. There are 2,13,766 ATMs in the country, and most of them are managed by MSPs who appoint cash-in-transit companies to replenish the currency notes in the machines.

According to MSPs, the regulations are well-intentioned as they recognise the role of cash in the economy and put the onus on banks to ensure cash availability. However, they say that the penalty is not well thought out because banks outsource most of the work and treat the regulations as something to be passed through to the MSPs.

“While the intent behind this RBI circular is welcome, penalty approach alone is unlikely to resolve the issue of ATM currency outage. In fact, it is quite likely that this penalty will become a pass-through, from banks to MSPs, and from MSPs to cash logistics agencies,” said Rituraj Sinha, group managing director at SIS, the largest security and cash-in-transit company in India.

According to Sinha, what needs to be addressed is the root causes of ATMs running dry, such as sub-optimal cash forecasting and delays in availability of ATM-fit currency.

“On-ground implementation of the RBI circular dated April 2018 is the real solution, not just before better security but also more accurate cash forecasting and on-time availability of currency to enable cash logistics agencies to upload ATMs on time and with an adequate amount of currency,” he said.

The 2018 circular requires banks to put in place stringent measures such as transporting cash in cassettes, in prescribed vehicles sticking to government norms on the transport of currency during specified hours of the day.

According to banks, it is difficult to implement all these norms under present cost structures.



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No cash in ATM? Banks to face penalty from October 1, BFSI News, ET BFSI

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Concerned over the inconvenience caused to the public due to the non-availability of cash in ATMs, the Reserve Bank has decided to penalise banks for failure to timely replenish currency notes in such machines.

The RBI will start imposing penalty on banks in case the ATMs remain out-of-cash for a total period of 10 hours in a month from October 1, 2021, onwards.

The scheme

“The Scheme of Penalty for non-replenishment of ATMs has been formulated to ensure that sufficient cash is available to the public through ATMs,” the RBI said in a circular.

The Reserve Bank of India has a mandate to issue banknotes and the banks are fulfilling this mandate by dispensing banknotes to the public through their wide network of branches and ATMs.

In this connection, it said a review of downtime of ATMs due to cash-outs was undertaken and it was observed that ATM operations affected by cash-outs lead to non-availability of cash and cause avoidable inconvenience to the members of the public.

It has, therefore, been decided that the banks/ White Label ATM Operators (WLAOs) will strengthen their systems/ mechanisms to monitor the availability of cash in ATMs and ensure timely replenishment to avoid cash-outs, the central bank said.

“Any non-compliance in this regard shall be viewed seriously and shall attract monetary penalty as stipulated in the ‘Scheme of Penalty for non-replenishment of ATMs’,” the RBI said.

The Scheme will be effective from October 01, 2021.

How will it work?

On condition for counting instances of cash-outs in an ATM, the RBI said it would come into play “when the customer is not able to withdraw cash due to non-availability of cash in a particular ATM”.

As regards the quantum of penalty, the central bank said “cash-out at any ATM of more than ten hours in a month” will attract a flat penalty of Rs 10,000 per ATM.

In the case of White Label ATMs (WLAs), the penalty would be charged to the bank, which is meeting the cash requirement of that particular WLA.

The bank, may, at its discretion, recover the penalty from the WLA operator, it added.

At the end-June 2021, there were 2,13,766 ATMs of different banks in the country.



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RBI imposes ₹1 crore penalty on Karnataka Bank

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The Reserve Bank of India (RBI) has imposed a penalty of ₹1 crore on Karnataka Bank, the lender informed the stock exchanges.

In an intimation to the stock exchanges on Wednesday, the bank said: “Pursuant to Regulation 30 of the SEBI (LODR), Regulations, 2015, we wish to inform that Reserve Bank of India (RBI), vide email dated July 7, 2021, has imposed a monetary penalty of ₹1 crore on the bank for contravention of the directions contained in RBI circular on ‘Lending to Non-Banking Financial Companies (NBFCs) and ‘Bank Finance to Non-Banking Financial Companies (NBFCs)’ while sanctioning credit facilities to M/s Infrastructure Leasing and Financial Services Ltd (IL&FS) and its group companies.”

“We further inform that as Bank had already made full loan provision, there is no other financial impact other than the penalty amount,” it said in the intimation to the stock exchanges.

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NHB imposes ₹4.75 lakh fine on HDFC

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The National Housing Bank has imposed a monetary penalty on Housing Development Finance Corporation Ltd (HDFC) of ₹4.75 lakh for non-compliance with certain provisions.

“…NHB has on July 5, 2021 imposed a monetary penalty of ₹4,75,000 plus GST on the Corporation for technical non-compliance with NHB circular NHB(ND)/DRS/PolNo.58/2013-14 dated November 18, 2013 and NHB(ND)/DRS/Policy Circular No.75/2016- 17 dated July 1, 2016,” HDFC said in a stock exchange filing on Tuesday.

The Corporation will be taking necessary steps to comply, it further said.

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RBI imposes Rs 25 lakh penalty on Punjab and Sind Bank, BFSI News, ET BFSI

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The Reserve Bank of India on Friday imposed a penalty of Rs 25 lakh on Punjab and Sind Bank for non-compliance with certain provisions of directions on ‘Cyber Security Framework in Banks’.

The state-owned bank had reported a few cyber incidents to the RBI on May 16 and 20, 2020, the central bank said while giving details.

“Examination of the incident reports and the report of the forensic analysis of the said incidents revealed, non-compliance with aforesaid directions,” it said.

The RBI issued a show-cause notice to the bank.

“After considering the bank’s reply to the show-cause notice, oral submissions made during the personal hearing and examination of further clarifications/ documents furnished by the bank, RBI came to the conclusion that to the extent the charges of non-compliance with RBI directions were substantiated, it warranted imposition of monetary penalty,” the central bank said.

Meanwhile, a penalty of Rs 1 lakh on the Nagar Sahkari Bank Limited, Etawah for contravention of certain regulations, including the one on ‘Income Recognition, Asset Classification, Provisioning and Other Related Matters – UCBs’.

In both cases, the RBI said the penalty 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 them with their customers.



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