Page 12 - Banking Finance April 2018

RBI CORNER

RBI slaps penalty on Indian Overseas Bank and Axis Bankruptcy board, RBI

Bank enters into pact for in-
Reserve Bank of India said it has imposed a penalty of Rs.3 crore on Axis Bank creased cooperation
for violation of non-performing asset classification
The Insolvency and Bankruptcy
norms, and Rs.2 crore on Indian Overseas Bank for not
Board of
complying with the know your customer (KYC) regula-
tions. RBI said it had carried out a statutory inspection India
of private sector player Axis Bank with reference to its inked an
financial position as on 31 March 2016. The inspection, agree-
inter alia, revealed "violations of various regulations issued by RBI in the assess- ment
ment of non-performing assets (NPA)",the central bank said in a statement. with the
RBI for increased cooperation in ef-
"The RBI has imposed, on February 27, 2018, a monetary penalty of Rs 30 million
fective implementation of the insol-
on Axis Bank Limited for non-compliance with the directions issued by RBI on In- vency law. The pact, which provides
come Recognition and Asset Classification (IRAC) norms," it said. Regarding the
for sharing of information as well as
state-owned Indian Overseas Bank, the regulator said in a separate release that resources, among others, also comes
a "fraud was detected" in one of the branches of the bank. "The examination of at a time when the authorities are
the documents, including the bank's internal inspection report, revealed, inter alia, working on ways to address the huge
non-compliance with the directions issued by RBI on Know Your Customer (KYC) amount of nonperforming assets in
norms", RBI said, while imposing the Rs2 crore penalty on IOB.
the banking sector. An official re-
RBI said the action on the two banks is based on deficiencies in regulatory com- lease said the IBBI and the RBI are
pliance and "is not intended' to pronounce upon the validity of any transaction interested in the effective implemen-
or agreement entered into by the bank with its customers. tation of the Code and its allied rules
and regulations, through a quick and
RBI panel to reconcile NPAs to prevent frauds efficient resolution process.
In order to stem the wide fluctuation between bad loans and provisions declared RBI seeks details of all
by banks and those assessed by the RBI, the bank-
ing regulator has decided to constitute an Expert bank LoUs
Committee to look into the reasons for this diver- RBI has asked banks to provide it
gence and the steps needed to prevent frauds. The with details of all
5 member Committee, headed by YH Malegam, a Letters of Under-
former member of the Central Board of Directors taking issued by
of RBI, will also examine the role and effectiveness of various types of audits them in the past
conducted in banks. several years, ac-

The other members of the Malegam Committee will be Bharat Doshi, Member, cording to sources. The regulator is
Central Board of Directors, RBI; S Raman, former Chairman and Managing Di- ramping up pressure on lenders, in-
rector, Canara Bank and former Whole-Time Member, SEBI; and Nandkumar creasing its scrutiny and laying down
Saravade, Chief Executive Officer, Reserve Bank Information Technology Pvt Ltd deadlines for them to fix gaps in their
(ReBIT). AK Misra, Executive Director, RBI, will be the Member-Secretary. systems, in the aftermath of the
Punjab National Bank fraud.
RBI Governor Urjit Patel had said that during the Annual Financial Inspections
of banks, it had been observed that there was a divergence between the non- The RBI wrote to all banks recently
performing assets and provisions declared by the banks and those assessed dur- asking for details of the LoUs they
ing the AFI process. "This has adverse implications on timely recognition of ac- had written, including the amounts
tual risk, trustworthiness and transparency of books of accounts... To address outstanding, and whether the banks
this, disclosure requirements have been put in place: banks have to disclose... had pre-approved credit limits or
the details of such divergences where these exceed specified thresholds," the kept enough cash on margin before
Governor said. issuing the guarantees, sources said.

12 | 2018 | APRIL | BANKING FINANCE