J&K Bank Fined Rs 2.5 Cr By RBI; Axis Bank, Bank Of Maharashtra Also Penalised
The Reserve Bank of India (RBI) issued monetary penalties to three private and public sector banks on Friday. Jammu & Kashmir Bank incurred a fine of Rs 2.5 crore, Bank of Maharashtra was penalised with Rs 1.45 crore, and Axis Bank faced a penalty of Rs 30 lakh.
These penalties were imposed on 22 June.
Jammu & Kashmir Bank:
RBI imposed a Rs 2.5 crore penalty on J&K Bank for not following specific directions given by RBI regarding the creation of a central repository of large common exposures across banks, reporting revisions in the Central Repository of Information on Large Credits (CRILC), statutory and other restrictions on loans and advances, and the time-bound implementation and strengthening of SWIFT-related operational controls.
RBI's inspection revealed that J&K Bank failed to comply in the following areas: (i) ensuring the accuracy and quality of data submitted to CRILC, (ii) providing term loans to a corporation without conducting proper due diligence on the viability and bankability of the projects and without ensuring that the repayment of the loans was not made from budgetary resources, and (iii) creating financial/non-financial messages in SWIFT without ensuring that the underlying transactions were properly reflected in the Core Banking System (CBS).
Bank of Maharashtra:
Bank of Maharashtra, a government-owned bank, was fined Rs 1.45 crore for non-compliance with RBI's directions on statutory and other restrictions on loans and advances, as well as the advisory on "Man in the Middle (MiTM) Attacks in ATMs."
The bank failed to comply in the following ways: (i) sanctioning a term loan to a corporation that was meant to substitute budgetary resources for certain projects without conducting proper due diligence on the viability and bankability of the projects, and without ensuring that the repayment of the loan was not made from budgetary resources, and (ii) failing to implement the necessary control measures for ATMs concerning the encryption of communication between the ATM terminal/PC and the ATM Switch within the specified timeframe.
Axis Bank:
Axis Bank, a leading private sector lender, was penalised with Rs 30 lakh for non-compliance with RBI's directions on prudential norms for income recognition, asset classification, and provisioning related to credit card accounts.
RBI's inspection revealed that Axis Bank imposed penal charges on certain accounts for late payment of credit card dues, even though the customers had paid the dues on time through third-party platforms.
It is important to note that before imposing the penalties, RBI sent notices to these three banks, requesting them to explain why a penalty should not be imposed for failing to comply with the given directions.
After considering the banks' responses to the notices, RBI concluded that the charges of non-compliance were substantiated and warranted the imposition of monetary penalties on these banks.
