RBI imposed monetary penalty on Federal Bank Limited

RBI imposed monetary penalty on Federal Bank Limited The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs.5.72 crore on Federal Bank Limited for shortfall in regulatory compliance.

As per RBI Press Release:

The Reserve Bank of India has imposed a monetary penalty of Rs.5.72 crore (Rupees Five crore and seventy-two lakh only) on Federal Bank Ltd. (the bank) for non-compliance with the provisions of ‘Reserve Bank of India (Financial Services provided by Banks) Directions, 2016’ issued by RBI by an order dated July 7, 2022. This penalty has been imposed in exercise of powers vested in RBI under the provisions of section 47 A (1) (c) read with section 46 (4) (i) of the Banking Regulation Act, 1949. This action is based on the regulatory compliance shortcomings and is not meant to rule on the legality of any deal or arrangement the bank has with its clients. Background The Statutory Inspection for Supervisory Evaluation (ISE) of the bank conducted by RBI with reference to the bank’s financial position as on March 31, 2020 & the subsequent supervisory assessment carried out by RBI, and examination of the Risk Assessment Report, Scrutiny Report and all related correspondence pertaining to the same, revealed, inter alia, non-compliance with the aforesaid RBI directions to the extent the bank failed to ensure that no incentive (cash or non-cash) was paid to its staff engaged in insurance broking/corporate agency services by the insurance company. 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 failure to comply with the said directions, as stated therein. The RBI determined that the charge of noncompliance with the aforementioned RBI directions was substantiated and warranted imposition of a monetary penalty, to the extent of noncompliance with such directions, after taking into account the bank's response to the notice and oral arguments made in the personal hearing.