RBI imposed Monetary Penalty on Indian Bank

The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs.55.00 lakh on Indian Bank (the bank) for non-compliance with certain provisions of the ‘Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016’, by an order dated April 06, 2023.

This penalty was issued by the RBI in accordance with the provisions of sections 47 A (1) (c), 46 (4) (i), and 51 (1) of the Banking Regulation Act of 1949.

This action is based on the deficiencies in regulatory compliance observed and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

RBI conducted a review of the bank in July 2020 in response to a high-value fraud revealed by the bank. The examination of the scrutiny report and all related correspondence revealed, among other things, non-compliance with the aforementioned directions by the bank to the extent that the bank failed to undertake customer due diligence measures as mandated when opening an account in the name of a sole proprietary firm. In addition, a notice was given to the bank advising it to show cause why a penalty should not be imposed on it for failing to comply with the stated instructions.

After considering the bank’s response to the notice, oral submissions made during the personal hearing, and additional submissions made by it, the RBI concluded that the charge of non-compliance with the aforementioned RBI directions was substantiated and warranted imposition of monetary penalty on the bank, to the extent of such non-compliance.