Jammu & Kashmir

RBI imposes Rs 2.5 crore penalty on JK Bank for violating rules

A top view of a Jammu and Kashmir Bank's buliding in Srinagar, Kashmir. [FPK Photo / Umar Farooq]

New Delhi: The Reserve Bank of India (RBI) has taken action against three banks for violating regulations, imposing monetary penalties on them.

Jammu and Kashmir Bank has been fined Rs 2.5 crore, Bank of Maharashtra Rs 1.45 crore, and Axis Bank Rs 30 lakh.

Jammu and Kashmir Bank was penalized for failing to comply with certain directions issued by the RBI.

These directions included maintaining a central repository of large common exposures across banks, adhering to statutory and other restrictions, and ensuring the timely implementation and strengthening of SWIFT-related operational controls.

The RBI’s inspection conducted on March 31, 2021, revealed that the bank did not comply with these directions. Additionally, the bank provided extended term loans to a corporation without conducting proper due diligence and did not ensure that the repayment or servicing of these loans came from budgetary resources.

The bank also created financial/non-financial messages in SWIFT without ensuring that the underlying transactions were accurately reflected in the Core Banking System (CBS).

Axis Bank faced a penalty for non-compliance with specific provisions of the RBI’s directions on Prudential Norms on Income Recognition, Asset Classification, and Provisioning pertaining to Credit Card Accounts. The RBI found that the bank had levied penal charges on certain accounts for late payment of credit card dues, despite customers having paid on time through third-party platforms.

Bank of Maharashtra was penalized for non-compliance with the RBI’s directions on Loans and Advances, Statutory and Other Restrictions, and Advisory on Man in the Middle (MiTM) Attacks in ATMs.

The RBI’s inspection revealed that the bank had sanctioned a term loan to a corporation without conducting proper due diligence on the viability and bankability of the projects for which the loan was intended. Additionally, the bank failed to implement the necessary control measures for ATMs concerning end-to-end encryption of communication within the prescribed timeline.

These penalties reflect the RBI’s commitment to enforcing compliance and maintaining a robust banking system in India. The central bank continues to monitor banks’ adherence to regulations and takes appropriate action against those found in violation.

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