The Reserve Bank of India (RBI) recently took regulatory action against two prominent private banks, ICICI Bank and Kotak Mahindra Bank, for serious violations of banking rules. ICICI Bank faced a hefty penalty of ₹12 crore 19 lakh, primarily for lending to companies where two of its directors held positions and for failing to report fraud incidents within the mandated time frame. On the other hand, Kotak Mahindra Bank incurred a penalty of ₹3.95 crore due to various infractions, such as charging interest on loans against sanction terms and not adhering to the RBI’s customer contact guidelines. These actions by the RBI emphasize the importance of adherence to banking regulations and ethical conduct within the Indian banking sector.
The Reserve Bank of India (RBI) has imposed a penalty of ₹12 crore 19 lakh on ICICI Bank for violating rules related to the code of conduct for the bank’s directors and for not reporting fraud within the required timeframe. The violations were found during inspections for the financial years ending in March 2020 and March 2021. The bank had given loans to companies where two of its directors also served as directors, and it engaged in the sale of non-financial products. Additionally, ICICI Bank failed to report frauds to the RBI within the prescribed three-week period after detection.
The RBI also penalized Kotak Mahindra Bank with a penalty of ₹3.95 crore for different violations discovered during an inspection for the financial year ending in March 2022. These violations included levying interest on some loans contrary to the terms of sanction, not conducting an annual review of a service provider, and not adhering to customer contact hours directed by the RBI.
The recent penalties imposed by the RBI on ICICI Bank and Kotak Mahindra Bank serve as a stern reminder of the critical need for financial institutions to maintain the highest standards of ethical conduct and compliance with banking regulations. In the case of ICICI Bank, the violation of rules related to lending to companies with overlapping directorships and the failure to promptly report fraud incidents have resulted in a significant monetary penalty.
Similarly, Kotak Mahindra Bank’s shortcomings, including disregarding loan sanction terms and customer contact guidelines, have led to financial consequences. The regulatory actions underscore the RBI’s commitment to maintaining the integrity and soundness of the banking sector in India, ultimately safeguarding the interests of depositors and the broader financial stability of the country.