The Reserve Bank of India (RBI) has issued orders imposing record-breaking monetary penalties of approximately Rs. 12.2 crore on ICICI Bank and ₹3.95 crore on Kotak Mahindra Bank Limited for violation of RBI regulations and failure to promptly report instances of fraud.
While conducting the Statutory Inspections for Supervisory Evaluation (ISE) for the year 2020 and 2021 and reviewing the Risk Assessment Reports, along with all relevant correspondence, it was discovered that ICICI Bank had approved loans for companies in which two of its directors also held directorial positions. Moreover, ICICI Bank was found to have participated in the marketing and sale of non-financial products. In addition, the Bank failed to report instances of fraud to the RBI within the specified timeframes.
Similarly, in the Risk Assessment Report/Inspection Report for ISE 2022 and all related correspondence, it was discovered that Kotak Mahindra Bank Limited also had several shortcomings. These included: (i) Failing to conduct an annual review or due diligence of the service provider. (ii) Neglecting to ensure that customers are not contacted between the hours of 7 pm and 7 am. (iii) Charging interest from the disbursement due date instead of the actual date of disbursement, which goes against the terms and conditions of the loan agreement. (iv) Imposing foreclosure charges in the absence of a clause in the loan agreement that allows for prepayment penalties on loans recalled or foreclosed by the bank. As a result, both banks received notices requesting explanations on why penalties should not be imposed on them.
After carefully reviewing the bank’s response to the notice, the oral arguments presented during the personal hearing, and the additional submissions provided by the banks, RBI determined that the banks had indeed failed to comply with the provisions of the BR Act and the RBI directions. Consequently, penalties were imposed.