RBI Slaps Axis Bank With A Monetary Penalty of Rs 25 Lakh: Here’s Why

The Reserve Bank of India (RBI) levied a monetary penalty of Rs 25 lakh (Rupees Twenty five lakh only) on Axis Bank Limited through an order dated 01 September 2021, for violation of/non-compliance specified under 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), according to the press report of the central bank. "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," said RBI.

"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 aforesaid directions issued by RBI, ie., 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," according to the report of the central bank.

"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," the order further mentioned.

On the other hand Reserve Bank of India (RBI) has also levied a monetary penalty of Rs 2.00 lakh (Rupees Two lakh only) on Prathamik Shikshak Sahakari Bank Ltd., Satara (the bank) in an order dated 01 September 2021 for contravention of/non-compliance. "This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949, 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," according to the statement of RBI.

The order of RBI has added that "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 counterparty 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, the statement further mentioned.