RBI fines Axis Bank, IOB for violation of norms
Indian Overseas Bank fined ~20 mn for KYC breach
The RBI has fined Axis Bank ~30 million for violating regulations for assessment of non-performing assets. The RBI also imposed a penalty of ~20 million on Indian Overseas Bank for a fraud detected in one of its branches due to the failure to comply with know-your-customer norms.
The Reserve Bank of India (RBI) has fined private lender Axis Bank ~30 million for violating Reserve Bank of India’s norms for assessment of non-performing assets ( NPAs). The monetary penalty is for non-compliance with directions issued by the RBI on Income Recognition and Asset Classification (IRAC) in reference to Axis Bank’s financial position as on March 31, 2016.
The central bank had to go through an explanation exercise twice, for 2015-16 and 2016-17, to elaborate on gaps in its assessment of bad loans and the RBI’s estimates.
The RBI had issued a notice to Axis Bank on November 16, 2017, asking why penalty should not be imposed on it for non-compliance with directions. After considering the bank’s reply and submissions, the RBI came to the conclusion that charges of non- compliance with its directions/guidelines were substantiated and warranted imposition of monetary penalty.
The highlight for Axis Bank in the third quarter was the sharp relief on asset quality. After at least six quarters of increase in the pool of bad loans, gross NPAs fell to ~250 billion from ~274 billion in the second quarter. The gross NPA ratio fell to 5.3 per cent from 5.9 per cent, while the net NPA ratio was down to 2.6 per cent against 3.1 per cent.
The RBI also imposed a monetary penalty of ~20 million on Chennai-based Indian Overseas Bank (IOB) for a fraud detected at one of its branches due to the failure to comply with know-your-customer (KYC) norms.
The central bank said it imposed both fines on February 27, 2018. The actions were “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,” it said.