01) Today
vide a Press Release RBI has announced that it has imposed monetary penalty on
the following three banks for violation of Reserve Bank of India instructions:-
Sl. No. Name of the bank Penalty Amount (in ` mn)
1. Bank
of Maharashtra 15
2. Dena
Bank 15
3. Oriental
Bank of Commerce 15
02) Broadly
RBI guidelines on ‘Know Your Customer (KYC)’, and ‘Anti Money Laundering (AML)’,
were violated.
03) Eight
other banks, namely, Central Bank of India, Bank of India, Punjab and Sind
Bank, Punjab National Bank, State Bank of Bikaner & Jaipur, UCO Bank, Union
Bank of India and Vijaya Bank have been cautioned to put in place appropriate
measures and review them from time to time to ensure strict compliance of KYC
requirements in future.
04) The
penalties have been imposed in exercise of powers vested in the Reserve Bank
under the provisions of Section 47(A) (1) (c) read with Section 46(4)(i) of the
Banking Regulation Act, 1949.
05) RBI
has clarified that action is based on deficiencies in regulatory compliance and
is not intended to pronounce upon the validity of any transaction or agreement
entered into by the bank and its customers.
Background
06) On
the basis of a complaint received by the Reserve Bank from a private
organisation, a scrutiny of fixed accounts opened in its name in Mumbai based
branches of certain public sector banks was undertaken in July 2014.
07) With
more complaints and involvement of other banks coming to light, a wider
thematic review was conducted and in all 12 branches of 11 Public Sector Banks
was covered. The scrutiny/thematic review looked into the modus operandi of the
alleged frauds involving accounts of certain organisations in these banks,
deficiencies / irregularities while opening Fixed Deposits (FD) and extending
Overdraft (OD) facility there against.
08) Besides the effectiveness of systems and
processes in place pertaining to implementation of KYC norms / AML standards in
respect of these accounts was also looked into.
The findings revealed violation
of certain regulatory guidelines issued by the Reserve Bank as also other
disquieting actions on the part of the banks, as under:
·
non-adherence to certain aspects of KYC norms of
the Reserve Bank like customer identification and acceptance procedure
·
non-adherence to the Reserve Bank’s instructions
on monitoring of transactions in customer accounts
·
non-adherence to the Reserve Bank’s instructions
regarding funds received through Real Time Gross Settlement System (RTGS)
·
opening of fixed deposit accounts and granting
overdrafts there against without due diligence or process
·
weaknesses in the internal control systems,
management oversight, use of internal accounts for parking customer funds, etc.
·
involvement of middlemen/intermediaries in
opening of the accounts as also subsequent operations in those accounts
09) Based
on the findings, the Reserve Bank issued a show cause notice to 11 banks, in
response to which the individual banks submitted written replies. After
considering the facts of each case and individual bank’s reply, the Reserve
Bank came to the conclusion that some of the violations of serious nature were
substantiated and warranted imposition of monetary penalty on three banks,
namely, Bank of Maharashtra, Dena Bank and Oriental Bank of Commerce.
10) Failure
on the part of the above three banks to take timely remedial measures had
aggravated the seriousness of the contraventions and its impact.
11) In
respect of eight other banks, namely, Central Bank of India, Bank of India,
Punjab and Sind Bank, Punjab National Bank, State Bank of Bikaner & Jaipur,
UCO Bank, Union Bank of India and Vijaya Bank, based on written and oral
submissions, it was decided not to impose any monetary penalty as the banks’
explanations were judged to be reasonable.
