The Reserve Bank of India (RBI) has imposed Rs 27-crore penalty on 13 public and private sector banks and asked eight others including SBI and ICICI Bank to ensure strict compliance with know your customer (KYC) and FEMA guidelines.
The RBI had undertaken a scrutiny on advance import remittances of around Rs 6,100 crore in 21 banks in October and November 2015 on the basis of inputs received from a public sector bank. The RBI said it has imposed monetary penalty on 13 banks for violation of regulatory directions and guidelines, among other things, on KYC and FEMA norms. These banks are: Bank of Baroda (Rs 5 crore), Punjab National Bank (Rs 3 crore), Syndicate Bank (Rs 3 crore), UCO Bank (Rs 2 crore), HDFC Bank (Rs 2 crore), Allahabad Bank (Rs 2 crore), Canara Bank (Rs 2 crore), IndusInd Bank (Rs 2crore), SBBJ (Rs 2 crore), Bank of India (Rs 1 crore), Corporation Bank (Rs 1 crore), RBL Bank (Rs 1 crore) and SBM (Rs 1 crore).
The Indian Express had reported about the penalty on BoB, PNB and HDFC Bank on Tuesday. The RBI further said that eight other banks — Axis Bank, Federal Bank, ICICI Bank, Kotak Mahindra Bank, OBC, Standard Chartered Bank, SBI and Union Bank of India — have been “advised to put in place appropriate measures and review them from time to time to ensure strict compliance with KYC requirements and FEMA provisions on an ongoing basis”. The central bank’s action is in connection with the Rs 6,100-crore foreign exchange fraud exposed last year. What has complicated matters further was the revelation that while remittances were sent to Hong Kong and Dubai via banks, actual exports were sent to Afghanistan.
“In respect of eight other banks, based on written and oral submissions, it was decided to advise them to put in place appropriate measures and review the same from time to time to ensure strict adherence to KYC/AML requirements as well as FEMA provisions on an ongoing basis,” the RBI said. It, however, added that “this 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 and its customers”.
The scrutiny in the 21 banks examined the alleged irregularities in opening and monitoring of accounts including violations under FEMA provisions. The RBI also looked into the effectiveness of systems and processes for implementation of KYC norms/AML standards. The findings, the apex bank said, revealed weaknesses in the internal control systems, management oversight and violation of certain regulatory guidelines.
The weakness was revealed in non-adherence to KYC requirements like customer identification and risk categorisation, instructions on monitoring of transactions in customer accounts and the guidelines issued under the FEMA provisions.