Jul 16, 2013 02:48 PM IST | Source:

RBI fines 22 banks, warns 7 for KYC violations

The Reserve Bank of India (RBI) on Monday slapped penalty of nearly Rs 50 crore among 22 banks for violation of Know Your Customer (KYC) or anti money laundering (ALM) norms. Moreover, it warned seven more banks by issuing cautionary letters.

  • bselive
  • nselive
Todays L/H

Moneycontrol Bureau

The Reserve Bank of India (RBI) on Monday slapped penalty of nearly Rs 50 crore among 22 banks for violation of Know Your Customer (KYC) or anti money laundering (ALM) norms following its investigation. Moreover, it warned seven more banks by issuing cautionary letters.

The minimum amount of fine was at Rs 50 lakh imposed on Ratnakar Bank while the Indian Overseas Bank will have the maximum amount of Rs 3.002 crore. India's largest lender the State Bank of India (SBI) will pay a fine of Rs 3 crore. Other large to meddium size state-owned banks including Bank of Baroda (BoB), Bank of India, Central Bank of India will fork out similar quantum of monetary penalty each.

Must read: Yes Bank sees corporate rivalry behind family feud

Among private sector lenders, RBI found violations of regulatory instructions (in terms of KYC and ALM) in Yes Bank (fined Rs 2 crore), Kotak Mahindra Bank (Rs 1.501 crore), ING Vysya Bank (Rs 1.50), Federal Bank(Rs 3 crore), Development Credit Bank or DCB (Rs 1 crore), Dhanlaxmi Bank (Rs 2 crore), Lakshmi Vilas Bank (Rs 2.50 crore) and Jammu & Kashmir Bank (Rs 2.501).

"The Reserve Bank came to the conclusion that some of the violations were substantiated and warranted imposition of monetary penalty. The Reserve Bank penalised the first lot of three banks, on June 10, 2013," RBI said in a release.

Also read: RBI fines HDFC Bank, Axis & ICICI Rs 1-5 cr

"The investigation did not reveal any prima facie evidence of money laundering. However, any conclusive inference in this regard can be drawn only by an end to end investigation of the transactions by tax and enforcement agencies."

South-based public sector lenders including Canara Bank, Andhra Bank and Vijaya Bank will have to shell out to the tune Rs 3.001 crore, Rs 2.50 crore and Rs 2 crore respectively.

North-based Punjab National Bank (PNB) and Punjab & Sind Bank are carrying a fine of Rs 2.50 crore each. Oriental Bank of Commerce (OBC) will pay a sum of 2 crore. Kolkata-based United Bank of India (UBI) is also penalised by Rs 2.50 crore.

Also read: Here's how banks violated RBI norms on KYC

Deutsche Bank A. G. is the only foreign lender to have appeared in the list of 22 banks. It will have to share Rs 1 crore with the central bank as fine.

The penalties have been imposed in exercise of powers vested in the Reserve Bank under the provisions of Section 47(A)(1)( c ) read with Section 46(4)(i) of the Banking Regulation Act, 1949.

"In respect of seven other banks, where such scrutinies have been conducted and banks' explanation called for, the banks' written or oral submissions were found to be satisfactory or no violation of serious nature has been established. It has, therefore, been decided not to impose any monetary penalty but to issue only suitable cautionary letters," RBI said in a release.

A similar scrutiny, according RBI, was also conducted in seven other banks during April and May 2013. The process of follow up action in respect of those banks is at different stages of its completion.

Those seven lenders are Barclays Bank PLC, BNP Paribas, Citi Bank N.A.; Royal Bank of Scotland, Standard Chartered Bank, State Bank of Patiala and the Bank of Tokyo Mitsubishi UFJ.

Looking back...

A few months back,, an online magazine, had conducted a series of sting operations on banks and alleged large scale violation of KYC and ALM norms in the majority of banks.

Taking cognizance of it, the the banking regulator had formed an investigation committee and carried out a scrutiny of books of accounts, internal control, compliance system of those banks.

Follow us on
Available On