RBI imposes ₹12 cr fine on ICICI Bank

The Reserve Bank of India (RBI) on Tuesday imposed a monetary penalty of ₹12.19 crore on ICICI Bank for sanctioning loans to companies in which two of its directors were also directors and failing to report frauds to the regulator within the prescribed timelines.

This comes after the central bank conducted statutory inspections for supervisory evaluation of ICICI Bank with regards to its financial position as of March 31, 2020, and March 31, 2021. The examination of the risk assessment reports revealed that the bank had sanctioned loans to companies in which two of its directors were also directors, marketed and engaged in the sale of non-financial products, and failed to report frauds to RBI within the prescribed timelines, says the banking regulator.

Consequently, a notice was issued to the bank advising it to show cause as to why a penalty should not be imposed on it for failure to comply with the provisions of the Banking Regulation Act, the regulator says.

"After considering the bank's reply to the notice, oral submissions made during the personal hearing and additional submissions made by it, RBI came to the conclusion that the charge of non-compliance with the provisions of the BR Act and the RBI directions was substantiated and warranted imposition of monetary penalty on the bank," the regulator says in a statement.

The central bank also imposed a monetary penalty of ₹3.95 crore on Kotak Mahindra Bank 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, and customer service in banks among others.

Inspections done by the RBI revealed non-compliance with its directions by Kotak Mahindra Bank to the extent it failed to carry out an annual review or due diligence of the service provider, failed to ensure that customers are not contacted after 7 p.m. and before 7 a.m., levied interest from disbursement due date instead of the actual date of disbursement, contrary to the terms & conditions of sanction, and levied foreclosure charges despite there being no clause in the loan agreement for levy of prepayment penalty on loans recalled or foreclosure initiated by the bank.

This action, according to RBI, 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.

These penalties come days after the RBI directed the state-run Bank of Baroda to stop onboarding customers onto the 'bob World' mobile application with immediate effect. "Any further onboarding of customers of the bank on the bob World application will be subject to rectification of the deficiencies observed and strengthening of the related processes by the bank to the satisfaction of RBI," the central bank said.