RBI slaps penalty on ICICI Bank for flouting rules

RBI slaps penalty on ICICI Bank for flouting rules

Deficiencies in regulatory compliance resulted in the imposition of a hefty penalty

The Reserve Bank of India (RBI) held India's largest private sector ICICI Bank guilty of flouting certain rules and slapped a monetary penalty worth ₹ 3 crore.

RBI imposed the penalty on 3 May 2021 for contravention of directions issued by it on Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks.

"This penalty has been imposed in exercise of powers vested in RBI under the provisions of section 47 A (1) (c) read with section 46 (4) (i) of the Banking Regulation Act, 1949 (the Act)," the RBI said in a press release.

The RBI clarified that the action against ICICI Bank is based on the deficiencies in regulatory compliance and was not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

ICICI Bank on its part said that it had misunderstood certain provisions. In an update to stock exchanges, it said that the penalty was imposed for shifting certain investments from HTM (held to maturity) category to AFS (available for sale) category in May 2017.

The bank had transferred two separate categories of securities on two different dates from HTM to AFS in April and May of 2017. The bank said in the exchange note that it believed the transfers from HTM to AFS was permissible as per Master Circular on Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks' dated 1 July 2015.

RBI issued a notice to the bank asking it to show cause as to why a penalty should not be imposed on it for failure to comply with the directions issued by it.

India's Apex Bank considered ICICI Bank's reply to the notice, oral submissions made in the personal hearing and examination of additional submissions made by it and came to the conclusion that the aforesaid charge of non-compliance was substantiated and warranted imposition of monetary penalty.