- ICICI didn’t comply with ‘Loans and Advances – Statutory and Other Restrictions’
- ICICI also failed due diligence to assess the feasibility and sustainability
- Yes Bank violated regulations related to ‘Customer Service in Banks’
- ICICI Bank’s Rs 1 Crore Penalty, Yes Bank’s Rs 91 Lakh Penalty
In a recent development, the Reserve Bank of India (RBI) wielded its regulatory authority by imposing fines on two major banks, ICICI Bank and Yes Bank, for various instances of non-compliance. These penalties highlight the central bank’s stringent approach towards upholding regulatory standards within the banking sector.
The RBI levied a significant fine of Rs 1 crore on ICICI Bank for its failure to comply with regulations concerning ‘Loans and Advances – Statutory and Other Restrictions’. An in-depth inspection conducted by the RBI for the financial year 2022 shed light on certain discrepancies within ICICI Bank’s lending practices. Specifically, the bank had extended term loans to specific entities under the guise of substituting budgetary resources allocated for designated projects. However, what drew the RBI’s attention was ICICI Bank’s apparent oversight in conducting comprehensive due diligence to evaluate the feasibility and sustainability of these projects. This lack of diligence resulted in the disbursement of loans without adequate assurance that the generated revenue would sufficiently cover the debt servicing requirements. Furthermore, the repayment of these loans was facilitated using budgetary resources without proper verification of their allocation to effectively monitorable projects.
Similarly, Yes Bank found itself on the receiving end of regulatory action, facing a penalty of Rs 91 lakh for violations related to ‘Customer Service in Banks’ and ‘Unauthorized Operation of Internal/Office Accounts’. Upon scrutiny during the FY22 inspection, the RBI unearthed troubling practices within Yes Bank’s operations. It was revealed that the bank had penalized accounts with insufficient or zero balances, contravening regulatory guidelines governing customer service in banks. Moreover, Yes Bank was found to have opened and utilized internal accounts in customers’ names for unauthorized activities, including the inappropriate parking of funds and the processing of transactions without proper authorization.
These penalties underscore the critical importance of regulatory oversight within the banking sector. The RBI’s proactive measures serve as a safeguard against potential lapses in compliance that could compromise the stability and integrity of the financial system. By holding banks accountable for their actions and imposing deterrent penalties for non-compliance, the RBI reinforces the imperative for strict adherence to regulatory guidelines.
In conclusion, the imposition of fines on ICICI Bank and Yes Bank by the RBI underscores the central bank’s unwavering commitment to maintaining regulatory discipline within the banking sector. These penalties serve as a stark reminder to financial institutions to uphold the highest standards of compliance to safeguard the interests of depositors and maintain the credibility of the banking system.
(With inputs from agencies)
