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RBI Imposes Rs 84.50 Lakh Penalty on Central Bank of India for Non-Compliance with Fraud Reporting Norms

The Reserve Bank of India (RBI) has announced a penalty of Rs 84.50 lakh on Central Bank of India for its failure to comply with certain provisions related to fraud classification and reporting. The penalty was imposed after a statutory inspection revealed the bank’s non-compliance with reporting fraudulent accounts within the specified timeframe. Additionally, the bank had also charged customers flat SMS alert fees instead of basing charges on actual usage.

Non-Reporting of Fraudulent Accounts

During the supervisory evaluation conducted by the RBI based on the bank’s financial position as of March 31, 2021, it was discovered that Central Bank of India had not reported certain accounts as fraud to the RBI within the mandated period of seven days after the decision of the Joint Lenders’ Forum (JLF) to declare them as fraudulent. This non-compliance with fraud reporting norms was considered a violation by the RBI.

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Incorrect SMS Alert Charges

Another area of non-compliance identified during the inspection was the bank’s practice of recovering SMS alert charges from customers on a flat basis, rather than accurately reflecting the actual usage. This practice deviated from the regulatory guidelines set by the RBI.

RBI’s Notice and Penalty Imposition

Upon identifying these violations, the RBI issued a notice to Central Bank of India, calling upon the bank to provide justifications as to why a penalty should not be imposed. The bank submitted a reply to the notice and also presented oral submissions during the personal hearing held by the RBI. However, after carefully considering the bank’s response and the submissions made, the RBI concluded that the charges of non-compliance with its directions were substantiated. Consequently, the RBI decided to impose a monetary penalty of Rs 84.50 lakh on Central Bank of India.

Clarification on Penalty

The RBI clarified that the imposed penalty should be viewed as a consequence of deficiencies in regulatory compliance and not as a judgment on the validity of any transaction or agreement entered into by the bank with its customers. The penalty serves as a disciplinary measure to enforce adherence to established guidelines and ensure the integrity of the banking system.

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