RBI imposes ₹1.45 cr monetary penalty on Central Bank of India

The Reserve Bank of India (RBI) has imposed ₹1,45,50,000 monetary penalty on Central Bank of India for non-compliance with certain directions issued by it on ‘Loans and Advances’ and ‘Customer Protection’.

RBI, in a statement, elaborated that the monetary penalty has been imposed on the public sector bank as it sanctioned a working capital demand loan to a corporation against amounts receivable from Government by way of subsidies.

Further, the Bank failed to credit (shadow reversal) the amount involved in a few instances of unauthorised electronic transaction to the customer’s account within 10 working days from the date of notification by the customer and resolve complaints and provide compensation to certain customers within 90 days from the date of receipt of such complaints.

RBI cited the aforementioned instances as being non-compliant with its directions on ‘Loans and Advances – Statutory and Other Restrictions’ and ‘Customer Protection – Limiting Liability of Customers in Unauthorised Electronic Banking Transactions’. These violations were found in the Statutory Inspection for Supervisory Evaluation (ISE 2022) of the Bank conducted by the central bank 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 directions,” RBI said.

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, inter alia, that the charges against the bank were sustained, warranting imposition of monetary penalty, it added.

Meanwhile, RBI has imposed a monetary penalty of ₹96.40 lakh on Sonali Bank PLC for violation of various provisions and directions under the Credit Information Companies (Regulation) Act, 2005, RBI’s directions on KYC and ‘Time-bound implementation and strengthening of SWIFT – related operational controls’ .

Sonali Bank PLC, India Operation, is part of nationalized commercial Bank of Bangladesh.

RBI said the bank had failed to (i) put in place a system of periodic review of risk categorisation of accounts, (ii) put in use a robust software throwing alerts for transactions inconsistent with risk categorisation and updated profile of the customers, (iii) implement certain SWIFT-related operational controls within the stipulated timelines and (iv) become a member of all the CICs (Credit Information Companies) within the stipulated timeline.

The central bank cited the aforementioned instances as being in contravention of Section 15 of the Credit Information Companies (Regulation) Act, 2005 [CIC (R) Act] and the directions issued by it under the same.

Further, RBI also flagged non-compliance with its Know Your Customer (KYC)) Directions, 2016’ and directions issued on ‘Time-bound implementation and strengthening of SWIFT – related operational controls’.

The aforementioned violations were found in ISE 2022 of the Bank conducted by RBI with reference to its financial position as on March 31, 2022 and and Information Technology (IT) examination of the bank in March 2022.

In the case of both banks, RBI said its 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.

Further, imposition of monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank.