Axis Bank says RBI caution circular an old legal matter, corrective action taken

Axis Bank

Axis Bank has clarified that the “letter of caution” it received from the Reserve Bank of India (RBI) recently was about a long-pending legal matter which has been addressed.

Compliance remains central to the bank’s operations and it has already taken corrective measures, CEO Amitabh Chaudhry told Moneycontrol after the earnings call on October 15.

“The specific case relates to an old account from around 2010,” Chaudhry said in response to Moneycontrol’s query. The RBI issued the letter to the private lender on October 10.

The issue took time to come up because one of the account holders has been contesting it in court. It is something that happened 14 years ago and legal disputes tend to drag on, he said.

“We’ve reviewed the matter carefully, taken corrective action, and the impact of that is already reflected in our numbers. As an institution, we keep reassessing what more we need to do, and we are confident of convincing the authorities that there is nothing to worry about,” the CEO said.

The RBI circular cautioned the bank over certain KYC lapses linked to an account from 2009. The circular was part of the central bank’s supervisory process, which includes periodic inspections of regulated entities and communications to ensure adherence to documentation, due diligence, and governance standards.

According to the circular, the account in question was under litigation for several years and involved questions over documentation and procedural compliance dating back to the early years of Axis Bank’s expansion into retail and small business lending.

Axis Bank’s management said it is engaging with the regulator to provide all necessary clarifications. “Compliance is front and centre for us,” Chaudhry added. “We have to keep looking at what we need to do as an institution, and we’ve done that.”

On October 15, Axis Bank reported a 26 percent year-on-year drop in standalone net profit to Rs 5,090 crore from the September quarter due to RBI’s mandated one-time provisioning.