RBI: 11 Banks Get a Penalty of Rs.8.5 Crore for Failing to Report Fraud

The Reserve Bank of India (RBI) announced that a total penalty summing up to Rs.8.5 crore is imposed on 11 commercial banks and financial institutions on July 31, 2019. It said that the cause for the penalty is violating the norms of ‘Frauds classification and reporting by commercial banks and select FIs directions 2016’.

Providing the details, RBI specified that a fine of Rs.1.5 crore is imposed on Oriental Bank of Commerce. A fine of Rs.1 crore is imposed on Indian Overseas Bank, Punjab and Sind Bank, UCO Bank, and United Bank of India.

Similarly, banks such as Corporation Bank, Bank of Baroda, Federal Bank, Corporation Bank, Jammu and Kashmir Bank, State Bank of India, and Punjab National Bank get a penalty of Rs.50 lakh. 

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Central Bureau of Investigation (CBI) initiates criminal proceedings on fraud cases whenever they are reported. Despite advising the lenders to report frauds immediately, RBI has noticed that banks and financial institutions have delayed or missed reporting frauds.

Show cause notices were issued to these 11 banks asking them to provide reasons as to why they should not be penalised for non-compliance.

Considering the specific case of Punjab National Bank, RBI has imposed a fine of Rs.50 lakh for the delay in bringing the fraud of Kingfisher Airlines to its notice. The fraud monitoring report-1 submitted by Punjab National Bank, which revealed the fraud in the account of Kingfisher Airlines.

Under Section 47(A)(1)(c) and 46(4)(i) of the Banking Regulation Act, 1949, a penalty of Rs.50 lakh was imposed for non-compliance.