RBI Takes Action Against Major Bank, Imposes Rs 61.95 Lakh Penalty

New Delhi: The role of the Reserve Bank of India in the Indian banking system is that of a vigilant and strict supervisor. Whenever any bank, whether government or private, deviates from the laid-down rules and guidelines, the RBI takes action without delay. Recently, a similar case has come to light with Kotak Mahindra Bank, one of the big private banks of the country.

Why was a penalty imposed on Kotak Mahindra Bank?

RBI has imposed a fine of Rs 61.95 lakh on Kotak Mahindra Bank. This action has been taken due to negligence and ignorance of rules found in the functioning of the bank. According to the central bank, the investigation revealed that the bank did not follow many important banking rules properly.

What was the biggest mistake in violation of rules?

The most serious case was found to be related to 'Basic Savings Bank Deposit Account,' i.e. BSBD account. As per rules, certain categories of customers are allowed to hold only one BSBD account. But investigation revealed that the bank opened additional accounts in the names of such customers who already had this account.

What went wrong with business correspondents and credit data?

The RBI investigation also revealed that Kotak Mahindra Bank had entered into agreements with its business correspondents in which they were allowed to carry out activities outside the prescribed scope. Apart from this, cases of giving wrong information related to some borrowers by the bank to the credit information company, i.e., credit bureau, were also found. This omission is considered serious, as incorrect data can damage a customer's credit score.

Was the bank warned earlier?

RBI followed the entire legal process before imposing the penalty. A show cause notice was issued to the bank, and its reply was sought. Kotak Mahindra Bank also presented its side, but after an in-depth examination of the reply and documents, RBI found that the bank's explanation was not satisfactory.

Which laws were found violated?

During the investigation, it became clear that the bank had violated the provisions of Section 47A(1)(c) of the Banking Regulation Act and the Credit Information Companies (Regulation) Act, 2005. After this, RBI used its powers and decided to impose a financial penalty.

Will this penalty affect customers' deposits?

RBI has made it clear that this action will not have any negative impact on the bank's customers. This penalty has been imposed only for lapses in following regulatory rules. Customers' deposits, FDs, savings accounts, or other investments are completely safe, and all transactions done with the bank remain valid.

What message does this action send?

This whole matter clearly indicates that RBI will not tolerate any laxity in following the rules. No matter how big a bank is, if it deviates from the prescribed rules, action is sure to be taken against it.