RBI Imposes Rs2.92 Crore Penalty on Canara Bank for Non-compliance
Moneylife Digital Team 15 May 2023
The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs2.92 crore on Canara Bank for non-compliance with certain directions issued by RBI on know-your-customer (KYC) norms in 2016.
 
RBI says Canara Bank also flouted various other rules and guidelines such as non-compliance with directions issued by RBI with regard to interest rate on advances and deposits, limiting liability of customers in unauthorised electronic banking transactions and customer service in the banks, etc.
 
RBI said that the action is based on the deficiencies in regulatory compliance and is not intended to pronounce on the validity of any transaction or agreement entered into by the Bank with its customers.
 
The statutory inspection for supervisory evaluation (ISE) of Canara Bank was conducted by RBI with reference to its financial position as on 31 March 2021. Also, scrutiny of the Bank was carried out by RBI in July 2020 based on a high-value fraud reported by another bank. Examination of the risk assessment report, the scrutiny report and all related correspondences pertaining to the same revealed, inter alia, non-compliance with the following RBI directions:
 
(i) Failed to link interest on floating rate retail loans and loans to MSM to an external benchmark.
 
(ii) Failed to link interest on floating rate rupee loans sanctioned and renewed during financial year 2020-21 to its marginal cost of lending rate (MCLR).
 
(iii) Opened several savings deposit accounts in the name of ineligible entities.
 
(iv) Registered dummy mobile numbers in several credit card accounts.
 
(v)  Failed to pay any interest on deposits accepted under the daily deposit scheme and prematurely withdrawn within 24 months of opening of the accounts.
 
(vi) Recovered SMS alert charges from customers, not on actual usage basis and 
 
(vii) Failed to undertake ongoing customer due diligence and put into use robust software for generating alerts when transactions were inconsistent with customer profile.
 
Further, a notice was issued to Canara Bank advising it to show cause why penalty should not be imposed on it for failure to comply with the said directions, as stated therein.
 
After considering the Canara Bank reply to the notice, oral submissions made during the personal hearing and examination of additional submissions made by it, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with such directions.
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