The Reserve Bank of India (RBI) is currently contemplating a thorough evaluation of its penalty framework.
Potential measures for consideration include:
- Increase in the monetary penalty,
- exploring the possibility of tying to the scale of regulated entities (REs), particularly those deemed systemically important
- Addressing instances of repeated offences.
- The option of reclaiming the remuneration of chief executive officers and key management personnel (KMP) could be explored.
- imposing additional capital charges on regulated entities.
It is a follow-up to RBI Governor Shaktikanta Das’ meeting with the boards of state-run and private banks on “issues related to governance, ethics, the role of boards, and supervisory expectations” held of 29 May, 2023. The review is being conducted by the central bank in order to enhance the standards of corporate governance in REs and increase the premium placed on it.
One of the key agendas set by Mint Road as part of its initiatives for FY24 was to examine the feasibility of implementing a scale-based approach to the issue. During the fiscal year 2023, a total of 211 penalties were recorded, amounting to a sum of Rs 40.39 crore. In the previous two fiscal years, the figures were 189 crore rupees and 65.32 crore rupees, and 61 crore rupees and 31.36 crore rupees. There is also a technical aspect to consider since penalties are applied with a delay.