Reserve Bank of India fines

Reserve Bank of India fines seven national banks

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Reserve Bank of India (RBI) forfeits INR 2 million to three banks for tampering with various norms 

RBI has imposed penalties on seven banks for violating various norms. In highlights, three leading banks in the country which are HDFC Bank, Kotak Mahindra Bank, and IDBI Bank were fined of INR 2 million each for non-compliance with various guidelines issued by RBI on Know Your Customer (KYC) norms and Anti-Money Laundering (AML) standards. 

Reserve Bank of India guidelines for banks

Know your customer, alternatively known as know your client or simply KYC is the process of a business verifying the identity of its clients and assessing potential risks of illegal intentions for the business relationship.

Anti-money-laundering refers to a set of procedures, laws and regulations designed to stop the practice of generating income through illegal actions. As per RBI guidelines, all banks are required to formulate a KYC Policy with the approval of their respective boards. The KYC Policy consists of the following four key elements- Customer Acceptance Policy, Customer Identification Procedures, Monitoring of Transactions and Risk Management.

RBI said in a release, “Penalties are based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers.”

RBI found 438 financial institutions in violation of compliance with AML, KYC, CFT

RBI has increased its responsibility in fighting money laundering and with regards to this; it issued several advisories to the local financial institution in combating the same.

On a surprise check RBI found 438 financial institutions being in violation of compliance with Anti-Money Laundering (AML), Know Your Customer (KYC), and Combating the Financing of Terrorism (CFT) guidelines. Among those violators many were under the control of the central government and hence RBI believed government to be violators of the money laundering. RBI for the same reasons introduced various guidelines for non-complying customers but their execution is difficult because they hold around 8100 million of deposits in the economy.

Four other leading banks on the list

Four other banks including Allahabad Bank, Andhra Bank, Indian Overseas Bank, and Bank of Maharashtra were also fined for non-compliance with various directions issued by RBI. These banks did not follow rules provided by RBI for checking of the end use of funds, exchanging of information with other banks, classification and reporting of frauds, and on the restructuring of accounts. While Andhra Bank was fined INR 10 million, the other banks were fined INR 15 million each. 

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