RBI Imposes Rs 12.2 Crore Penalty on ICICI Bank for Lending Violations and Reporting Delays

The Reserve Bank of India (RBI) has imposed a significant penalty on ICICI Bank, totaling nearly Rs 12.2 crore, for multiple violations of lending rules and delays in reporting fraud. This penalty surpasses the Rs 10-crore fine imposed on HDFC Bank in May 2021 for irregularities in auto loans and exceeds the cumulative fines levied on private banks in FY23, amounting to Rs 12.17 crore.

The RBI’s scrutiny of ICICI Bank’s operations in 2020 and 2021 revealed several violations, including:

1. Granting loans to companies where two of the bank’s directors held board positions, which contravened RBI guidelines.
2. Marketing and selling non-financial products, which are beyond the scope of a commercial bank.
3. Failure to report frauds to RBI promptly.

Following the discovery of these irregularities, RBI issued a show-cause notice to the bank. After reviewing the bank’s response to the notice, oral submissions during a personal hearing, and additional submissions, RBI concluded that the charges of non-compliance with Banking Regulation Act and RBI directives were substantiated, warranting the imposition of a monetary penalty on the bank.

In addition to ICICI Bank, the RBI has also imposed a penalty of nearly Rs 4 crore on Kotak Mahindra Bank for various violations, including breaches in risk management, outsourcing, recovery agent practices, and loan management. The RBI’s inspection of Kotak Bank’s financial position as of March 2022 revealed multiple irregularities, leading to the imposition of penalties.

These actions by the RBI reflect the regulator’s commitment to upholding banking standards and ensuring compliance with its guidelines in the Indian banking sector.