RBI Imposes Penalty On ICICI Bank, Kotak Mahindra Bank For Failing To Report Fraud

The Reserve Bank of India (RBI) on Tuesday imposed penalties on two private sector lenders ICICI Bank and Kotak Mahindra Bank for non-compliance.

The RBI imposed a monetary penalty of Rs. 3.95 crores on the Kotak Mahindra Bank for non-compliance with RBI Directions on 'Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks', 'Recovery Agents engaged by Banks', 'Customer Service in Banks', and 'Loans and Advances - Statutory and Other Restrictions'.

The central bank has imposed a monetary penalty of Rs 12.19 crore on ICICI Bank Limited (the Bank) for contravention of Section 20(1) of the Banking Regulation Act, 1949 (the BR Act) read with directions issued by RBI on 'Loans and Advances-Statutory and Other restrictions', Section 6(2) and Section 8 of the BR Act read with directions issued by the RBI on 'Financial Services provided by the Banks', and non-compliance with the RBI directions on 'Frauds classification and reporting by commercial banks and select Fls'.

The RBI's inspection reports revealed that ICICI Bank had sanctioned/committed loans to companies in which two of its directors were also directors, (ii) marketed and engaged in the sale of non-financial product, and (iii) failed to report fraud to RBI within the prescribed timelines, said the RBI press release.

According to the RBI, the violations were detected during inspections for the financial years ending March 2020 and March 2021.

With reference to Kotak Mahindra Bank, the RBI said that the bank was found to have (i) failed to carry out annual review / due diligence of the service provider, (ii) failed to ensure that customers are not contacted after 7 p.m. and before 7 a.m., (iii) levied interest from disbursement due date instead of the actual date of disbursement, contrary to the terms & conditions of sanction, and (iv) levied foreclosure charges despite there being no clause in the loan agreement for levy of prepayment penalty on loans recalled/foreclosure initiated by the bank.

Today, the share price of Kotak Mahindra Bank was down 0.97% at Rs 1754.30 at 11 am IST, while ICICI Bank shares were down 1.34% at 942.20 per piece at 11:34 am IST.