RBI slaps 25-lakh penalty on Axis Bank

Mumbai: The Reserve Bank of India (RBI) has imposed, by an order dated September 01, a monetary penalty of Rs25 lakh on the private sector lender Axis Bank for contravention of/non-compliance with certain provisions of directions issued by RBI contained in the Reserve Bank of India – (Know Your Customer (KYC)) Direction, 2016.

The penalty has been imposed in exercise of powers vested in RBI under provisions of section 47A(1)(c) read with section 46(4)(i) of the Banking Regulation Act, 1949 (the Act). This action 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.

A scrutiny was carried out by RBI during February 2020 and March 2020 in a customer account maintained with the bank and it was observed that the bank had failed to comply with the directions issued by RBI. In fact, the bank failed to monitor/carry out on-going due diligence in the said account to ensure that the transactions were consistent with its knowledge about the customer, customer's business and risk profile. In furtherance to the same, a notice was issued to the bank advising it to show cause why penalty should not be imposed on it for contravention of the said directions, as stated therein.

After considering the bank's reply to the notice and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of contravention of/non-compliance with the aforesaid RBI directions were substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with the aforesaid direction, RBI said in a statement. In another case, the RBI has also imposed a monetary penalty of Rs 2.00 lakh on Prathamik Shikshak Sahakari Bank, Satara for contravention of/non-compliance with the directions issued by RBI on Exposure Norms and Statutory / Other Restrictions - UCBs. This penalty has been imposed in exercise of powers vested in RBI, taking into account the failure of the bank to adhere to the aforesaid directions issued by RBI.

The 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 with its customers. The inspection report of the bank based on its financial position as on March 31, 2019, revealed, inter alia, that the bank had not adhered to prudential inter-bank single counter party limit. Based on the same, a Notice was issued to the bank advising it to show cause as to why penalty should not be imposed for non-compliance with the aforesaid direction.

After considering the bank's reply to the Notice and oral submissions made during the personal hearing, RBI came to the conclusion that the aforesaid charge of non-compliance with the RBI direction was substantiated and warranted imposition of monetary penalty.