RBI penalises Credit Agricole – Corporate & Investment Bank and Karnataka Bank for Non-Compliance with Its Directives on Derivatives

Case Brief

The Reserve Bank of India imposed a monetary penalty of Rs 10 lakh on Credit Agricole – Corporate & Investment Bank and Rs 5 lakh on Karnataka Bank Limited for non-compliance with RBI directives on derivatives. RBI found that Credit Agricole failed to carry out proper due diligence on user appropriateness and suitability of products, and that its compliance function did not ensure strict observance of statutory provisions and RBI instructions for derivative transactions. Karnataka Bank was found to have failed to carry out proper due diligence on user appropriateness and suitability of products and to have failed to document pricing, periodic valuation of products, and quantification of financial risks in derivatives. The action was taken under Section 47A(1)(b) read with Section 46(4)(i) of the Banking Regulation Act, 1949, after show-cause notices, written replies, and oral submissions.