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, RBI added for penalties imposed on both lenders.
The penalty on Axis Bank is due to non-compliance with certain directions issued by RBI on ‘Loans and Advances – Statutory and Other Restrictions’, ‘Reserve Bank of India (Financial Services provided by Banks) Directions, 2016’, ‘Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016’, and ‘Levy of penal charges on non-maintenance of minimum balances in savings bank accounts’, the central bank said in a statement.
On the other hand, RBI fined IDBI Bank on grounds of non-compliance with the directions issued by RBI on “Frauds – classification and reporting by commercial banks and select FIs”, “Strengthening the Controls of Payment Ecosystem between Sponsor Banks and SCBs/UCBs as a Corporate Customer” and “Cyber Security Framework in Banks”.
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, it added for both the penalties imposed.
Moreover, for Axis Bank, RBI sated that after conducting inspection, it was known that the bank (i) did not maintain the prescribed margin in case of intraday facilities sanctioned to stockbrokers, (ii) followed restrictive practices in sale of insurance products to customers, (iii) failed to verify the copy of officially valid documents so produced by the clients, with the originals, while establishing account based relationships, (iv) had instances of customer IDs having multiple CIFs instead of a Unique Customer Identification Code (UCIC), and (v) levied penal charges for non-maintenance of minimum balance in savings bank accounts, not directly proportionate to the extent of the shortfall observed.
In the case of IDBI Bank, the central bank stated that inspections of the bank were conducted by RBI with reference to its financial positions as on March 31, 2017, March 31, 2018 and March 31, 2019, and the examination of the respective reports, including the incident of multiple fraudulent transactions over two days on June 08 & 09, 2019 in the accounts of two corporate Net banking customers (Co-operative banks) and the related correspondences.
Post probe, RBI revealed that IDBI Bank had (i) reported frauds to RBI with delay (ii) submitted Flash Reports in respect of frauds involving an amount of Rs 5 crore and above to RBI with delay and (iii) failed to implement time restrictions on holidays and data access control for corporate net banking to put through fund transfer resulting in unauthorized debit transactions in the account of two co-operative banks.
The central bank, in both the cases, issued a notice to the banks advising them to show cause as to why penalty should not be imposed on it.
However, after considering the bank’s reply to the notice, oral submissions made in the personal hearing and examination of additional submissions made by it, RBI came to the conclusion that the aforesaid charge of non-compliance with its directions was “substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with such directions.”
Shares of Axis Bank on Friday closed almost flat at Rs 794.90 apiece and shares of IDBI Bank closed 0.42 per cent lower at Rs 47.50 apiece on BSE.
