RBI penalises 13 banks for violating KYC norms, FEMA

The Reserve Bank of India (RBI) has penalised 13 banks for violating Know Your Customer (KYC) norms. The central bank has also advised eight banks to put in place measures to ensure strict compliance of KYC requirements and Foreign Exchange Management Act (FEMA) provisions.

The banks that have been penalised include Bank of Baroda (Rs 5 crore), Syndicate Bank (Rs 3 crore), Punjab National Bank (Rs 3 crore),  Allahabad Bank (Rs 2 crore), Canara Bank (Rs 2 crore), HDFC Bank (Rs 2 crore), IndusInd Bank (Rs 2 crore), SBBJ (Rs 2 crore), UCO Bank (Rs 2 crore), Bank of India (Rs 1 crore), Corporation Bank (Rs 1 crore), RBL Bank (Rs 1 crore) and SBM (Rs 1 crore).

The RBI has imposed monetary penalty on these banks for violation of regulatory directions / instructions / guidelines, among other things, on KYC norms, the central bank said in a release.

Eight other banks namely Axis Bank, Federal Bank, ICICI Bank, Kotak Mahindra Bank, OBC, Standard Chartered Bank, SBI and Union Bank of India have been advised to put in place appropriate measures and review them from time to time to ensure strict compliance of KYC requirements and FEMA provisions on an ongoing basis, RBI said.

RBI had undertook a scrutiny on advance import remittances in 21 banks in October/November 2015. The scrutiny examined the alleged irregularities in opening and monitoring of accounts including violations under FEMA provisions.

It also looked into the effectiveness of systems and processes for implementation of KYC norms/ anti money laundering (AML) standards. The findings revealed weaknesses in the internal control systems, management oversight and violation of certain regulatory guidelines issued by the Reserve Bank.

According to RBI, these included non-adherence to KYC requirements like customer identification and risk categorisation, non-adherence to the Reserve Bank’s instructions on monitoring of transactions in customer accounts and prompt filing of suspicious transaction reports and non-adherence to the directions / guidelines issued under FEMA provisions.

Based on the findings, the RBI issued a show cause notice to 21 banks. After considering their replies, the facts of each case, the RBI came to the conclusion that some of the violations of serious nature were substantiated and warranted imposition of monetary penalty on 13 banks.