RBI imposes Monetary Penalty on Three Banks; cautions Eight

Case Brief

The Reserve Bank of India imposed monetary penalties on three public sector banks: Bank of Maharashtra, Dena Bank, and Oriental Bank of Commerce. The action followed a complaint-driven scrutiny and broader thematic review of fixed accounts opened in the name of certain organisations across Mumbai-based branches. RBI found serious regulatory violations relating to KYC/AML compliance, including deficiencies in customer identification and acceptance procedures, monitoring of transactions, handling of RTGS-related funds, opening fixed deposit accounts and extending overdrafts without due diligence, weak internal controls and management oversight, use of internal accounts for parking customer funds, and involvement of middlemen/intermediaries. The penalties were imposed under Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949. Eight additional public sector banks were cautioned to put in place appropriate measures and review them periodically for strict compliance, but no monetary penalty was imposed on them.