The Reserve Bank of India (RBI) has imposed, by orders dated January 31, 2019 and February 25, 2019, monetary penalty for non-compliance with various directions issued by RBI on time-bound implementation and strengthening of SWIFT-related operational controls on 36 banks. These banks include Bank of Baroda , Catholic Syrian Bank Limited, Citibank N.A, Indian Bank, Karnataka Bank Limited (Rs 40 Million each), BNP Paribas, City Union Bank Limited, Indian Overseas Bank, UCO Bank, Union Bank of India, United Bank of India (Rs 30 million each), Allahabad Bank, Bank of Maharashtra, Canara Bank,DCB Bank Limited, Dena Bank, Jammu & Kashmir Bank Limited, Oriental Bank of Commerce , Syndicate Bank (Rs 20 million each) Bank of America N.A., Barclays Bank Plc, Central Bank of India, Corporation Bank, DBS Bank Limited, Deutsche Bank A.G, Hongkong and Shanghai Banking Corporation Limited, ICICI Bank Limited, IDBI Bank Limited, IndusInd Bank Limited , JP Morgan Chase Bank N.A, Karur Vysya Bank Limited, Punjab & Sind Bank , Standard Chartered Bank ,State Bank of India, Tamilnad Mercantile Bank Limited and YES Bank Limited (Rs 10 million each).
These penalties have been imposed in exercise of powers vested in RBI under the provisions of Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949, taking into account failure of the above banks to adhere to the aforesaid 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 banks with their customers.
An assessment of compliance with RBI directions on implementation and strengthening of SWIFT-related operational controls of 50 major banks was carried out which revealed that banks had not complied with one or more of the major directions pertaining to (i) direct creation of payment messages in the SWIFT environment, (ii) implementation of Straight Through Processing (STP) between CBS/Accounting System and SWIFT system, (iii) ensuring that users entering/ passing/authorizing the transactions in CBS were different from those operating in SWIFT environment, (iv) independent reconciliation of logs generated from SWIFT with corresponding entry passed in the CBS/accounting system, (v) introduction of an additional layer of approval for all payment messages exceeding a particular threshold, and (vi) Nostro reconciliation on T+1/T+5 basis.
Based on the findings of the assessment and extent of non-compliance, Notices (SCNs) were issued to 49 banks advising them to show cause as to why penalty should not be imposed for non-compliance with directions issued by RBI as indicated therein. After considering the replies received from the banks, oral submissions made in the personal hearings, where sought by the banks, and examination of additional submissions, if any, RBI decided to impose monetary penalty on aforementioned 36 banks, based on the extent of non-compliance in each bank. RBI will continue to closely monitor compliance with these controls on an ongoing basis.
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