In a recent development, the Reserve Bank of India has taken action against Standard Chartered Bank-India for non-compliance with certain provisions of the ‘Reserve Bank of India -Know Your Customer (KYC) Directions, 2016’. The central bank has imposed a monetary penalty of ₹30.00 lakh on the bank for these regulatory violations.
The penalty has been imposed by RBI under the powers vested in it under the provisions of section 47 A (1) (c) read with section 46 (4) (i) of the Banking Regulation Act, 1949. It is important to note that this penalty is a result of deficiencies in regulatory compliance and does not question the validity of any transactions or agreements entered into by the bank with its customers.
The action taken by RBI is based on the findings of the Statutory Inspection for Supervisory Evaluation (ISE 2021) conducted by the central bank. The inspection evaluated the bank’s financial position as of March 31, 2021. During the examination of the Risk Assessment Report/Inspection Report and the review of compliance with KYC directions, it was discovered that the bank had assigned multiple customer identification codes to some individual customers.
Consequently, a notice was issued to Standard Chartered Bank-India, requiring the bank to provide reasons as to why a penalty should not be imposed for its failure to comply with RBI’s directions. After considering the bank’s response to the notice, oral submissions made during the personal hearing, and additional submissions, RBI concluded that the bank’s non-compliance with the RBI directions was substantiated. Hence, the monetary penalty was deemed necessary.
It is imperative for banks and financial institutions to adhere to regulatory guidelines, particularly when it comes to Know Your Customer (KYC) norms. These measures are designed to ensure transparency, prevent money laundering, and maintain the integrity of the banking system. The penalty imposed on Standard Chartered Bank-India serves as a reminder to all financial entities to prioritize regulatory compliance and fulfill their obligations to safeguard the interests of their customers and the broader financial ecosystem.
