In the year 2019, India’s banking regulator has become active and after imposing fines on Citi Bank for non compliance of fit-and-proper records of its directors on 4th January’2019 Reserve Bank of India has imposed a monetary penalty of ₹1.50 crore each on Allahabad Bank, Bank of Maharashtra and Indian Overseas Bank, and ₹1 crore on Andhra Bank.
These fines were imposed on banks primarily because the banks have failed to identify the end use monitoring of funds. According to the norms, the bank sanctions the loan for a purpose and the borrower is onliged to use it for the same purpose. However, many borrowers by creating the corporate structure and network of individuals siphon these funds out from the loan money. Its the responsibility of the bank to track where is the money going. However, the public sector banks have failed in tracking the flow of the money out of the loans.
In a similar crack down against the private sector banks Reserve Bank imposed monetary penalty of ₹20 lakh each on HDFC Bank, IDBI Bank and Kotak Mahindra Bank for non-compliance with various directions issued by the RBI on Know Your Customer (KYC) norms and anti-money laundering (AML) standards.
Previously, Axis Bank was penalised for their non compliance with identification of the counterfeit currency notes on 5th February’2019. Reserve Bank of India in its order on 5th February had penalised Syndicate Bank has for violation of guidelines related to checking fraud and managing risk. Syndicate bank paid Rs 20 million as fine