In a statement, RBI said, "Failure on the part of these banks (ICICI Bank and BoB) to take timely remedial measures had aggravated the seriousness of the contraventions and their impact."
RBI reviewed the KYC and ALM processes of these banks after it received a complaint from a reputed statutory organisation in August 2013. This complaint included details of a fraud perpetrated in the five banks censured, with the connivance of certain officials of the statutory organisation.
"The fraudsters had managed to open fictitious accounts in the name of the statutory organisation in the above five banks and operated the accounts, mainly for encashing cheques/ demand drafts/ postal orders of which they were not the rightful owners, for periods ranging from one month to two years, without being detected by the banks," the RBI statement read, without naming the organisation. The central bank conducted a scrutiny of these five banks in January 2014.
The scrutiny revealed "non-adherence to certain aspects of Know Your Customer or KYC norms and non-adherence to instructions on monitoring of transactions in customer accounts", RBI said. The central bank decided to impose a monetary penalty on ICICI Bank and BoB after issuing a show-cause notice and reviewing their response. State Bank of India, Axis Bank and State Bank of Patiala were not fined "as the banks' explanations regarding the circumstances which led to the fictitious accounts getting opened and operated without detection, were judged to be reasonable".
This is not the first time private sector banks like ICICI Bank and Axis Bank have been pulled up by the central bank for violation of KYC norms. In 2013, RBI had imposed a penalty of Rs 1 crore and Rs 5 crore on ICICI Bank and Axis Bank, respectively, after an expose by the website, CobraPost, in which undercover reporters sought bank staff 's assistance in legitimising black money. Those fines were also for non-adherence to KYC, antimoney laundering and filing of Cash Transaction Reports (CRTs).
Most recently, in July 2014, the central bank had imposed a combined fine of Rs 1.5 crore on 12 banks, for not conducting adequate due diligence on loans granted to Deccan Chronicle Holdings, which led to a loss of Rs 4,000 crore to the banking sector.
Source : Economic Times