RBI Imposes Fine Of Rs 3 Cr On Axis Bank & Rs 2 Cr On IOB Over Violation Of NPA And KYC Norms

The Reserve Bank of India(RBI) slapped a fine of Rs 3 crore on Axis Bank and Rs 2 crore on Indian Overseas Bank(IOB) on March 5. The fine was imposed on Axis Bank for violating the Non-Performing Assets (NPA) norms. Indian Overseas Bank was fined for non-compliance with the Know Your Customer(KYC) regulations.

RBI imposes fine on Axis Bank and Indian Overseas Bank

RBI imposed the fine on the banks under Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949, taking into consideration the failure of bank to adhere to the mentioned directions/guidelines issued by RBI.

RBI said that on March 31, 2016, a statutory inspection of Axis Bank with reference to its financial position was carried out. The central bank said in a statement that the inspection, inter alia, revealed “violations of various regulations issued by RBI in the assessment of non-performing assets(NPA).”

RBI said in a statement,”The RBI has imposed, on February 27, 2018, a monetary penalty of Rs 30 million on Axis Bank Limited for non-compliance with the directions issued by RBI on Income Recognition and Asset Classification (IRAC) norms.”

Notably the Gross Non-Performing Assets(GNPA) of Axis Bank, increased by 22.5% to Rs 25,000.51 crore in Q3FY18 as compared to Rs 20,466.82 crore in Q3FY17. However, current quarter’s GNPA is down by 8.76% from Rs 27,402.32 crore in Q2FY18.

In terms of percentage, GNPA of Axis Bank came in at 5.28% in Q3FY18 – versus 5.22% in Q3FY17, but lower if compared with 5.90% GNPA recorded in Q2FY17.

In regard to Indian Overseas Bank, RBI said that fraud was detected in one of the branches of the state owned bank. The statement released by RBI said,”The examination of the documents, including the bank’s internal inspection report, revealed, inter alia, non-compliance with the directions issued by RBI on Know Your Customer (KYC) norms.”

RBI said that the charges of non-compliance with RBI directions/guidelines were confirmed after considering IOB’s reply, oral and written submissions made in the personal hearing. About the fine imposed on IOB, RBI said,”Based on the documents, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for non-compliance with directions issued by the RBI. After considering the bank’s reply, oral and written submissions made in the personal hearing, as also the additional information and documents furnished, the RBI came to the conclusion that the aforesaid charges of non-compliance with RBI directions/ guidelines were substantiated and warranted imposition of monetary penalty.”

The release also added that the action is being taken on deficiencies in the regulatory compliance and it doesn’t pronounce on the validity of any transaction or agreement entered into the bank with its customers.