RBI imposes penalty on ICICI Bank, Yes Bank

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹1 crore on ICICI Bank for non-compliance with certain directions issued by the banking regulator on ‘Loans and Advances – Statutory and Other Restrictions’.

The statutory inspection for supervisory evaluation of the bank was conducted by RBI with reference to its financial position as on March 31, 2022. Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said directions, the central bank says.

After considering the bank’s reply to the notice, oral submissions made during the personal hearing and examination of additional submissions made by it, RBI found that the following charge against the bank was sustained, warranting imposition of monetary penalty.

ICICI Bank had sanctioned term loans to certain entities in lieu of or to substitute budgetary resources envisaged for certain projects without undertaking due diligence on the viability and bankability of the projects to ensure that revenue streams from the projects were sufficient to take care of the debt servicing obligations, the repayment/servicing of which was made out of budgetary resources; and without ensuring that the funding proposals were for specific monitorable projects, the RBI says.

The action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transactions or agreement entered into by the bank with its customers, it adds. “Further, imposition of monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank,” the RBI says.

The RBI has imposed a monetary penalty of ₹91 lakh on Yes Bank for non-compliance with certain directions issued by RBI on 'Customer Service in Banks', and ‘Un-authorized Operation of lnternal/Office Accounts’. Yes Bank had levied charges for non-maintenance of minimum balance in certain savings accounts having insufficient or zero balance and opened and operated certain internal accounts in the name of its customers for unauthorised purposes like parking funds and routing customer transactions, the RBI found.

The inspection for supervisory evaluation of the bank was conducted by RBI with reference to its financial position as on March 31, 2022. Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said directions. After considering the bank’s reply to the notice, oral submissions made during the personal hearing and examination of additional submissions made by it, RBI found that the following charges against the bank were sustained, warranting imposition of monetary penalty.