RBI slaps Rs. 4 crore penalty on Citibank for non-compliance of regulations

The Reserve Bank of India (RBI) has imposed a fine of Rs. 4 crore on Citibank for non-compliance of regulations. In a Press Release issued on May 29, the RBI said the penalty has been imposed on Citibank N.A. for violation of banking regulations related to customer credentials.

According to the central bank, Citibank had not complied with the directions issued by the RBI on obtaining declaration from customers about credit facilities enjoyed with other banks, granting non-fund based facilities to non-constituent borrowers, verifying data available in CRILC database and obtaining no-objection certificate (NOC) from lending banks at the time of opening current accounts, and submission of compliance to risk assessment findings.

According to the Press Release, “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 Act, taking into account the failure of the bank to adhere to the aforesaid provision of the Act and the directions issued by RBI. This action is 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.”

The RBI said that the statutory inspection of the Indian operations of the bank with reference to its financial positions as on March 31, 2017 and March 31, 2018 and the Risk Assessment Reports (RARs) pertaining thereto revealed, inter-alia, contravention with the provisions of the Act and non-compliance with the concerned directions of the central bank.

In furtherance to the same, a notice was issued to the bank advising it to show-cause as to why penalty should not be imposed for contravention of the provisions of the Act and failure to comply with the directions issued by the RBI.

The Press Release further stated, “After considering the bank’s reply to the notice, oral submissions made during the personal hearing and examination of additional submissions, the RBI concluded that the aforesaid charges of contravention with the provisions of the Act and non-compliance with RBI directions warranted imposition of monetary penalty.”

Further, the RBI has also imposed penalty on three co-operative banks – Nagar Urban Co-operative Bank Ltd., Ahmednagar, TJSB Sahakari Bank Limited and Bharat Co-operative Bank (Mumbai) for non-compliance with various directions issued by it.

It has imposed a fine of Rs. 60 lakh on Bharat Co-operative Bank for non-compliance with the norms on income recognition, asset classification and reporting of frauds. Similarly, fines of Rs. 40 lakh and Rs. 45 lakh have been imposed on Nagar Urban Co-operative Bank and TJSB Sahakari Bank, respectively.