RBI Fines Manappuram Finance and IndusInd Bank for Non-Compliance

Reserve Bank of India (RBI) imposed penalties on IndusInd Bank and Manappuram Finance for failing to adhere to regulatory norms. The fines, amounting to Rs 27.3 lakh for IndusInd Bank and Rs 20 lakh for Manappuram Finance, were imposed following statutory inspections of both companies. These inspections reviewed their financial positions as of March 31, 2023, uncovering violations in compliance with RBI’s regulatory directions.

Key Points of the Penalties

RBI Penalty Imposed on IndusInd Bank

• Amount: Rs 27.3 lakh
• Violation: Opening of savings deposit accounts in the names of ineligible entities.
• Reason for Penalty: The penalty was imposed based on deficiencies in regulatory compliance. 
• It does not imply invalidity of transactions or agreements made by the bank with customers.

RBI Penalty Imposed on Manappuram Finance

• Amount: Rs 20 lakh
• Violation,
• Failure to verify customers’ PAN during customer acceptance.
• Allotting multiple Identification Codes to some customers instead of assigning a Unique Customer Identification Code (UCIC) for each individual.

RBI’s Process for Imposing Penalties

Statutory Inspection

• The RBI conducted inspections based on the financial positions of both institutions as of March 31, 2023.

Non-Compliance Identified

• The findings indicated non-compliance with the RBI’s regulatory norms, specifically concerning customer identification and account management.

Show Cause Notice

• A notice was issued to both companies by the RBI, requesting them to explain why penalties should not be imposed for their non-compliance with regulations.

Consideration of Responses

• The RBI considered the companies’ replies, additional submissions, and oral representations made during personal hearings.

Decision

• After reviewing the details, the RBI sustained the charge against IndusInd Bank concerning the opening of accounts for ineligible entities, leading to the monetary penalty.

Significance of the RBI’s Action

Strengthening Regulatory Compliance

• The penalties underline the RBI’s commitment to enforcing strict adherence to its regulatory guidelines, particularly in areas related to customer identification and account management.

Implications for Financial Institutions

• The RBI’s actions serve as a reminder for all financial institutions to ensure full compliance with regulations, particularly in matters involving customer identification and eligibility for banking services.

A Step Towards Accountability

• The penalties reflect RBI’s proactive approach to ensuring accountability and transparency in the financial services sector, safeguarding customer interests and maintaining the integrity of the banking system.