RBI slaps penalties on ICICI Bank and Kotak Mahindra bank for breaching regulatory standards

The Reserve Bank of India (RBI) has announced penalties against ICICI Bank and Kotak Mahindra Bank. ICICI Bank faces a penalty of Rs 12.19 crore for non-compliance with regulations related to 'Loans and Advances-Statutory and Other restrictions' and 'Frauds classification and reporting by commercial banks and select Financial Institutions (FIs)'.

Meanwhile, Kotak Mahindra Bank Limited has been penalized Rs 3.95 crore for contravening directives concerning "Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks," "Recovery Agents engaged by Banks," "Customer Service in Banks," and "Loans and Advances - Statutory and Other Restrictions."

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It is important to note that these penalties are a result of regulatory compliance shortcomings and are not a judgment on the validity of any specific transactions or agreements made by the banks with their customers.

RBI asks banks to adopt risk-based approach for KYC

Not only this, the Reserve Bank on Tuesday tightened the customer due diligence (CDD) norms by asking banks and regulated entities to adopt a risk-based approach for periodic updation of KYC.

After a review, the central bank has made amendments to the Master Direction (MD) on Know Your Customer (KYC).

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Regulated Entities (REs) have to undertake customer due diligence (CDD) as per the process for their customers.

The amendments follow the latest government instructions related to the Prevention of Money-Laundering Rules, Unlawful Activities (Prevention) Act (UAPA), and Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act.

The Reserve Bank said it has also updated certain instructions in accordance with the FATF recommendations.