Tuesday, August 16, 2022
HomeFinanceRBI fines Federal Bank Rs 5.7 cr for flouting insurance broking norms

RBI fines Federal Bank Rs 5.7 cr for flouting insurance broking norms


The Reserve Bank of India has imposed a penalty of Rs 5.72 crore on Federal Bank for non-compliance with norms related to insurance broking/corporate agency services.

“…the bank failed to ensure that no incentive (cash or non-cash) was paid to its staff engaged in insurance broking/corporate agency services by the insurance company,” the central bank said through a release on Friday.

The regulatory action taken by the RBI is not intended to pronounce upon the validity of any transactions or agreements entered into by Federal Bank and its customers, the release read.

The RBI separately imposed a fine of Rs 70 lakh on Bank of India for non-compliance with Know-Your-Customer (KYC) norms.

Bank of India failed to allot Unique Customer Identification Code (UCIC) to several customers and complete the process even within extended timelines, the RBI said.

Earlier in the week, the RBI imposed a monetary penalty of Rs 1.05 crore and Rs 1 crore on Kotak Mahindra Bank and IndusInd Bank, respectively, for deficiencies in regulatory compliance.

In the case of Kotak Mahindra Bank, RBI found that the private lender failed to maintain margin on advances to stock brokers; credit (shadow reversal) the amount involved in the unauthorised electronic transactions to the customers’ account within 10 working days from the date of notification by the customer.

The bank also failed to credit eligible amounts to the Depositor Education and Awareness Fund.

As for IndusInd Bank, the monetary penalty was imposed on it as it failed to adhere to customer due diligence procedures in the accounts opened using OTP based e-KYC, in non-face-to-face mode.

The largest ever fine that the RBI has imposed on a bank was Rs 58.9 crore on ICICI Bank in 2018. The penalty had been slapped on the bank for violation of norms regarding transfer to the held-to-maturity category for government bonds.

Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd.




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