The Reserve Bank of India (RBI) imposed a monetary penalty of Rs.20 million on Indian Overseas Bank for non-compliance with the directions issued by the former regarding Know Your Customer (KYC) norms.
This penalty, which was imposed on February 27, was in tune with the provisions of Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949, taking into account the failure of the bank in adhering to the aforesaid directions/guidelines issued by the RBI.
The central bank in an official release stated that the action was taken based on deficiencies in regulatory compliance, and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.
Earlier, a fraud was detected in one of the branches of IOB, wherein the examination of documents, including the bank's internal inspection report, revealed, inter alia, non-compliance with the directions issued by the RBI on KYC norms. Based on the documents, a notice was issued to the bank advising it to justify as to why a penalty should not be imposed for non-compliance with the directions issued by the central bank.
After considering the bank's reply, oral and written submissions made in the personal hearing, and additional information and documents furnished, the RBI came to the conclusion that the aforesaid charges of non-compliance with RBI directions/ guidelines were substantiated and warranted imposition of monetary penalty.