Let us know, why RBI imposes a penalty of Rs 4 crore on Citibank. RBI imposed the penalty for non-compliance of various directions issued by it.
Recently, RBI had imposed penalty on Citibank N.A. for violation of banking regulations pertaining to secrete information of customers. Citibank has made lapses in obtaining the declaration from customers about credit facility enjoyed from other banks. This is the violation of directions of RBI mentioned under the Act. Besides this deficiency, there are other lapses too:
- Providing non-fund based facilities to non- constituent borrowers
- Verifying data available in CRILC database and obtaining NOC from other banks at the time of opening Current Account
- In addition, there is also lapses in submission of compliance to risk assessment findings
Reserve Bank of India issues the direction under Section 35-A of Banking Regulations Act, 1949. The banking companies or company is bound to comply with such directions. Non-compliance of such directions will lead to a penalty under Section 47 A (1) (c) read with Section 46 (4) (i) of the Act.
The imposition of penalty is based on non-compliance of banking regulations. However, RBI did not intend to give its opinion on the validity of transaction or agreement between the bank and its customers, the officials said.
This contraventions and non-compliance of RBI directions are revealed through:
- Risk Assessment Reports
- Inspection of Indian Operations of the bank with reference to its financial position as on March 31, 2017 and March 31, 2018
In furtherance to the same, Reserve Bank of India issued a show-cause notice to the bank. In which bank is to provide the reason for not imposing penalty on it.
After considering the banks’ reply and oral submission made during personal hearing, RBI concluded that above charges of violation with the provisions of the Act and non-compliance of RBI direction is a good reason to impose penalty. The penalty has been imposed by an order dated 08th January, 2020
Besides this, RBI has also imposes a penalty of Rs. 60 lakhs to Bharat Co-operative Bank for not obeying asset classification rules. It also imposed the penalty on Thane Sahakari Bank and Ahmedabad’s Nagar Urban Co-operative Bank of Rs. 45 lakhs and Rs. 40 lakhs.
Why RBI imposes a penalty of Rs 4 Crore on Citibank. Kindly find here to know about current repo rate cut by RBI.