The Reserve Bank of India (RBI) has levied a penalty of Rs 7 crore on State Bank of India (SBI) based on findings of an inspection report. The regulatory lapses relate to bad loans classification, fraud risk management and reporting of frauds.
“Based on the inspection report and other relevant documents, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for non-compliance with directions issued by RBI,” the banking regulator said in a statement on July 15.
After considering the bank’s reply and oral submissions made in the personal hearing, RBI came to the conclusion that the aforesaid charges of non-compliance with RBI directions were substantiated and warranted imposition of monetary penalty, it added.
The annual inspection report was based on the bank’s financial position as on March 31, 2017. These reports are typically not accessible by public but earlier this month, the RBI released inspection reports of several banks including SBI for financial years 2012, 2013, 2014 and 2015 under the Right to Information (RTI) Act.
The reports revealed evergreening of loans, suppression of data, sidestepping know your customer (KYC) norms, flouting anti-money laundering rules and ignoring RBI reports on deficiencies.
Separately, RBI also penalised Union Bank of India with a Rs 10 lakh fine for non-compliance of cybersecurity norms.
“Based on reports of the generation of seven fraudulent messages of a total value of $171 million through the SWIFT system of the bank in 2016, an examination of the cybersecurity framework of the bank was carried out which revealed several deficiencies,” RBI said in a press release.
The misuse of SWIFT messaging system was at the core of Nirav Modi scam that left Punjab National Bank with a Rs 14,000 crore hole in its pocket. The RBI had tightened norms for the use of the worldwide financial messaging system.
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