The role of the Reserve Bank of India (RBI) in the Indian banking system is like that of a strict guardian. Whenever any bank, whether government or private, tries to cross the Lakshman Rekha of the prescribed rules, the Central Bank does not delay in cracking down on it. The latest case is related to ‘Kotak Mahindra Bank’, one of the leading private banks of the country. RBI has imposed a huge fine of Rs 61.95 lakh on Kotak Mahindra Bank for negligence in work and ignoring rules.
Long list of violations
RBI This action has not happened suddenly, but there are many serious reasons behind it. The Central Bank’s investigation revealed that Kotak Mahindra Bank did not follow many important standards related to banking services. The biggest error was found regarding ‘Basic Savings Bank Deposit Account’ (BSBD). The rule is that in certain categories of customers can have only one BSBD account, but the bank opened additional accounts even for those customers who already had this facility.
Not only this, the bank entered into such agreements with its ‘Business Correspondents’ (BCs) which were allowing them to carry out activities which do not fall within their jurisdiction. Apart from this, a case of giving wrong information about some borrowers to the Credit Information Company (CIC) i.e. in simple language, the credit bureau has also come to light. This is a serious issue because wrong information can spoil the credit score of any person.
Did not respond even after notice
Before imposing the fine, RBI had followed the entire legal procedure. A show cause notice was issued to Kotak Mahindra Bank asking why action should not be taken against them. The bank also replied to this notice and presented its clarification. However, when RBI thoroughly examined the bank’s reply and documents, it was not satisfied with the bank’s arguments.
During investigation, it became clear that the bank had violated the provisions of Section 47A (1) (c) of the BR Act and the Credit Information Companies (Regulation) Act, 2005. Only after this, the Central Bank, using its powers, decided to impose a penalty of Rs 61.95 lakh.
What will be the impact on customers’ deposits?
RBI has made it clear in its report that this action will not affect the bank customers. This penalty has been imposed only for ‘regulatory compliance’ i.e. lapse in following the rules.
This means that whatever transactions or agreements have been made between the bank and its customers will remain completely valid and secure. This penalty will not have any impact on your deposits, FD or other investments.
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