RBI penalises Yes Bank & IDFC Bank for violations

Penalty was for non-compliance with RBI directions on Income Recognition Asset Classification (IRAC) norms and delayed reporting of information security incident involving ATMs of the bank

October 24, 2017 / 07:16 PM IST
 
 
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Yes Bank and IDFC Bank have been fined a penalty of Rs 6 crore and Rs 2 crore, respectively, by the Reserve Bank of India for non-compliance with the directions issued by the central bank.

"The Reserve Bank of India (RBI) has imposed on October 23, 2017, a monetary penalty of ₹60 million (Rs 6 crore) on Yes Bank (the bank) for non-compliance with the directions issued by RBI on Income Recognition Asset Classification (IRAC) norms and delayed reporting of information security incident involving ATMs of the bank," RBI said in a statement on its website.

A statutory inspection of the bank with reference to its financial position as on March 31, 2016 revealed, inter alia, violations of various regulations issued by RBI in the assessment of non-performing assets (NPAs).


"A cyber-security incident involving ATMs of the bank was also not reported by the bank within the prescribed time-frame. Based on the inspection report and other relevant documents, a notice was issued to the bank dated July 6, 2017, followed by a supplementary notice dated August 24, 2017, advising it to show cause as to why penalty should not be imposed on it for non-compliance with directions issued by RBI, it said.


Data of over 32 lakh debit cards, including 6 lakh cards of State Bank of India alone among other banks, used at about 80 ATMs were suspected to have been compromised. The suspected security breach happened through a malware in the systems of Hitachi Payments Services, which served Yes Bank.


In a separate statement, RBI said, "The Reserve Bank of India (RBI) has imposed on October 23, 2017, a monetary penalty of ₹20 million (Rs 2 crore) on IDFC Bank (the bank) for contravention of regulatory restrictions pertaining to loans and advances."


The status report of IDFC Bank based on its financial position as on December 31, 2016, revealed, inter alia, non-adherence with certain directions pertaining to sanction / renewal of loans and advances. Based on the status report, a notice was issued to the bank dated August 07, 2017, advising it to show cause as to why penalty should not be imposed on it for non-compliance with directions issued by RBI, it said.

This penalty has been imposed in exercise of powers vested in RBI under the provisions of the Banking Regulation Act taking into account failure of the bank to adhere to certain directions issued by RBI.

This action is based on deficiencies in regulatory compliance and is not intended to pronounce on the validity of any transaction or agreement entered into by the bank with its customers, the banking regulator added.

After considering the bank’s replies, oral submissions made in the personal hearings, as also the additional information and documents furnished, the RBI came to the conclusion that the aforesaid charges of non-compliance with RBI directions were substantiated and warranted imposition of monetary penalty.

first published: Oct 24, 2017 07:16 pm

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