Why has RBI imposed penalty on Axis Bank and IDBI Bank?

The RBI has imposed monetary penalties on two private banks viz. Axis Bank and IDBI Bank. The penalty is to the tune of Rs.93 lakhs on Axis Bank and a penalty of Rs.90 lakhs on IDBI Bank. The penalty on Axis Bank was imposed on account of non-compliance with the directives issued by RBI pertaining to loans and advance, compliance with KYC guidelines as well as penalties for non-maintenance of minimum balance in savings accounts.

In addition, the allegation of RBI was also that Axis Bank faulted on norms of prescribed margin maintenance in case of intraday facilities sanctioned to stock brokers. It also followed certain practices in the sale of insurance products where the original documents in the case of ID proof were not verified by the bank. There were also instances where a single customer had multiple CIFs, something that is not permitted as per the extant rules.

The problems with IDBI Bank pertained to lapses in timely reporting of frauds, including submission of flash reports in the case of large frauds above the value of Rs.5 crore. It also did not implement time restrictions on corporate access to net banking on holidays. Both Axis bank and IDBI have been issued show cause notices asking them to explain the reasons for such lapses in compliance.

Both the banks have been asked to put in place necessary checks and balances and ensure that such incidents do not recur in the future.