New Delhi: ICICI Bank and Kotak Mahindra Bank have been penalised by the Reserve Bank of India (RBI) for violations of various regulatory directives.
ICICI Bank has received a monetary penalty of ₹12.19 crore for granting loans to companies in which two of its directors also held position as directors, engaging in non-financial product sales and marketing, and failing to report frauds to the RBI within the specified timelines, according to a statement from the central bank.
Kotak Mahindra Bank (KMB) has been fined ₹3.95 crore by the RBI for neglecting the annual review procedures and due diligence of their service provider and failing to ensure that customers are not contacted between 7 p.m. and 7 a.m.
The RBI’s statement also highlights that KMB charged interest from the disbursement due date instead of the actual disbursement date, which contradicted the terms and conditions of the loan approval. Additionally, KMB imposed foreclosure charges despite the absence of a prepayment penalty clause in the loan agreement for loans recalled or foreclosed by the bank.
In the case of ICICI Bank, the RBI pointed out violations of certain sections of the Banking Regulation Act, 1949, in alliance with directives issued by the central bank on ‘Loans and Advances-Statutory and Other Restrictions,’ ‘Financial Services provided by the Banks,’ and non-compliance with directives related to ‘Frauds classification and reporting by commercial banks and select Fls.’
This penalty is being imposed while ICICI Bank is dealing with allegations from the Central Bureau of Investigation regarding the sanctioning of a ₹1,875 crore loan to the Videocon Group in violation of lending policies during the tenure of the former CEO Chanda Kochhar.
In the past year, the RBI levied a total monetary penalty of ₹12.17 crore on seven private sector banks.
The last time ICICI Bank faced such a substantial penalty was in March 2018 when the RBI imposed a ₹58.9 crore monetary penalty for non-compliance with directives related to the direct sale of securities from its HTM (held-to-maturity) portfolio and proper disclosure of information.
Regarding KMB, the RBI highlighted non-compliance with its directives related to “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 RBI said that its actions are based on shortcomings in identified regulatory compliance and did not pass judgment on the validity of any transactions or agreements made by these banks with their customers.
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