RBI Imposes Hefty Fines On Kotak Mahindra And ICICI Banks For Rule Violations

The Reserve Bank of India (RBI), on October 17, 2023, announced penalties on Kotak Mahindra Bank Ltd and ICICI Bank Ltd for violating its regulations

Penalty On Kotak Mahindra Bank
Kotak Mahindra Bank Limited was fined Rs 3.95 crore for failure to adhere to RBI directions, including the code of conduct for outsourcing financial services, handling recovery agents, maintaining customer service standards, etc.

Lapses Made By The Bank
RBI’s statutory inspection revealed several instances of non-compliance by the bank, such as failing to conduct annual reviews of service providers, contacting customers outside permitted hours, and wrongly charging interest and other charges.

The bank failed to carry out an annual review/due diligence of the service provider, failed to ensure that customers were not contacted after 7 pm and before 7 am, levied interest from the disbursement due date instead of the actual date of disbursement contrary to the terms & conditions of sanction, and levied foreclosure charges despite there being no clause in the loan agreement for levy of prepayment penalty on loans recalled/foreclosure initiated by the bank.

Penalty On ICICI Bank
ICICI Bank Ltd. was fined Rs 12.19 crore for incorrectly sanctioning loans and failing to report fraud to RBI within the prescribed timelines. The violations include “the bank sanctioned loans to companies in which two of its directors were also directors, marketed and engaged in the sale of non-financial product, and failed to report fraud to RBI within the prescribed timelines.

This action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers, RBI said. The RBI's decision followed a review of the banks’ responses to notices and additional information provided.