The Reserve Bank of India (RBI) recently levied a substantial monetary penalty of ₹90.92 lakh on Axis Bank Ltd, citing non-compliance with several key directives issued by the apex bank. The penalties were related to the ‘Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016,’ ‘Loans and Advances – Statutory and Other Restrictions,’ ‘Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks,’ and ‘Code of Conduct for Opening and Operating Current Accounts.’
Violation of KYC Directions
- The RBI, in its official statement, revealed that the penalties were imposed after a thorough examination of the Risk Assessment Report, Inspection Report pertaining to ISE 2022, Scrutiny Report, and related correspondence.
- One significant area of concern was the Axis Bank’s failure to preserve records related to the identification of customers and their addresses in specific cases.
Persistent Customer Calls
- Another breach highlighted by the RBI was Axis Bank’s persistent calls to some customers.
- This breach not only raised concerns about customer privacy but also indicated a failure on the bank’s part to adhere to the prescribed guidelines.
Issues with Recovery Agents
- The regulatory authority pointed out that the bank failed to ensure appropriate behavior of recovery agents with some delinquent borrowers.
- Additionally, Axis Bank did not ensure the tape recording of the content or text of the calls made by recovery agents to certain customers, raising questions about compliance with ethical and legal standards.
Lack of Customer Declarations
- One of the crucial lapses identified by the RBI was the bank’s failure to obtain declarations from customers at the time of opening current accounts.
- This omission not only indicated a lapse in procedural adherence but also highlighted potential gaps in customer documentation.
Show Cause Notice and RBI’s Response
- In response to the identified shortcomings, the RBI issued a show-cause notice to Axis Bank, prompting the institution to provide reasons why a penalty should not be imposed for non-compliance with the regulatory directives.
- After considering the bank’s response, oral submissions during a personal hearing, and additional submissions, the apex bank concluded that the charges of non-compliance were substantiated.
Monetary Penalty Imposed
- Exercising its powers under the Banking Regulation Act, 1949, the RBI proceeded to impose a monetary penalty of ₹90.92 lakh on Axis Bank.
- This penalty serves as a regulatory measure to enforce compliance with the established guidelines and uphold the integrity of the banking sector.
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