ICICI Bank, StanChart penalised for violation of banking norms

The Reserve Bank of India (RBI) on Friday imposed a penalty of Rs 5 lakh each on ICICI Bank and Standard Chartered Bank for violating banking regulations.

ICICI Bank, the country’s largest private sector lender, was penalised for violating Know Your Customer (KYC) and Anti Money Laundering (AML) norms. Standard Chartered Bank, which is a leading foreign bank in India, was fined for not providing information, within the stipulated time, on a foreign currency loan it had arranged for an offshore special purpose vehicle.

The central bank took action against the lenders under the powers vested in it by the Banking Regulation Act, 1949.

RBI had issued a show cause notice to ICICI Bank on April 9, 2009. The central bank said on Friday that on careful examination of the bank’s replies and the oral submission it made during a personal hearing on August 3, 2009, the violation of rules was conclusively established.

Reacting to the development, an ICICI spokesperson said, “The violations referred to by RBI in its letter were in respect of a single customer account, for opening of which the bank had obtained a government issued identity card (driving license) and introduction from an existing customer.”

“RBI concluded that the substitution of introduction (by an existing customer) for address proof was not in accordance with the guidelines,” he added.

The government had in 2009 informed Parliament that ICICI Bank was twice issued a warning letter or advisory note in the previous two years for violating RBI guidelines. In 2007-08, ICICI Bank was accused of violating RBI guidelines/directives in opening new deposit accounts. This had led to opening of fictitious accounts by fraudsters at the bank’s Patna branch.

The bank was issued an ‘advisory note’ in December 2007 and a letter of warning in April 2008 for its irregular dealings in securities in Hong Kong.

In the case of Standard Chartered, a showcause notice was issued on March 30, 2010. The lender had responded to the notice in writing. It was also given an opportunity to make an oral submission on April 20. But the arguments put forth by the lender failed to impress RBI and a penalty was accordingly imposed.

“We have received the RBI notification. Standard Chartered Bank follows the highest standard of compliance in all its market and will continue to do so,” a bank spokesperson said on Friday.