RBI fines Axis Rs. 3cr, IOB Rs. 2cr for violations
The RBI has levied Rs. 3cr fine on Axis Bank and Rs. 2cr penalty on Indian Overseas Bank (IOB) for various violations. While Axis hasn't complied with income recognition and asset classification (IRAC) norms, IOB hasn't followed know your customer (KYC) regulations. The violation by IOB came to light after a "fraud was detected" in one of its branches.
RBI found mismatches in Axis' reporting of NPAs
During 2016-17, RBI found mismatches in nine Axis accounts in terms of their classification into performing or non-performing assets (NPAs). In fact, it found 156% additional NPAs than reported by the bank. In November'17, it asked Axis to show cause why penalty shouldn't be imposed. "After considering the bank's reply...RBI concluded non-compliance charges were substantiated and warranted imposition of penalty," it said.
Similar penalty levied earlier on Yes Bank
Penalties for similar violations have been slapped on other banks too. In October, Yes Bank was fined Rs. 6cr for discrepancies in NPA classification. Since then, big names including HDFC and SBI have issued divergence disclosures. According to analyst Hemindra Hazari, such accounting mis-statements are punishable by imprisonment under the Banking Regulation Act. Hence a Rs. 3cr-penalty isn't even "a rap on Axis' knuckles."
Indian Overseas Bank in trouble over violation of KYC norms
Meanwhile, after a fraud, RBI examined IOB's documents, including the bank's internal inspection report. It then found non-compliance with KYC norms and imposed a Rs. 2cr penalty. RBI didn't give details about the fraud. The central bank clarified that action against the two banks "isn't intended to impact the validity of any transaction or agreement entered into by the bank with its customers."
