The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs57.50 lakh on the government-owned Indian Overseas Bank for non-compliance with certain directions issued by it on the classification and reporting of frauds by commercial banks and select FIs (financial institutions).
The central bank said, "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."
Before imposing the penalty, RBI had conducted a statutory inspection for supervisory evaluation of the Bank regarding its financial position as of 31 March 2020, and the examination of the risk assessment report, inspection report, and all related correspondence about them.
According to the banking regulator, the inspection revealed non-compliance with the directions issued by RBI, inter-alia, to the extent the bank (i) failed to report certain instances of frauds involving ATM card cloning/skimming, to the RBI within three weeks from the date of detection, (ii) failed to ensure integrity and quality of data when it did not report credit information in central repository of information on large credits (CRILC) on certain borrowers having aggregate exposure of Rs5 crore and above, and (iii) linked certain floating rate loans to micro and small enterprises, extended by it on or after 1 October 2019, to MCLR/Base Rate instead of an external benchmark.
Following this, RBI had issued a notice to the bank advising it to show cause as to why the penalty should not be imposed on it for failure to comply with the directions issued by the central bank.
After considering the Bank’s reply to the notice and examination of additional submissions made by it, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with such directions.
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