Manojit Saha | Mumbai April 20, 2013 Last Updated at 00:30 IST
Banks will now be fined Rs 1 cr for violating every single norm
New norm comes into effect after Section 46 of Banking Regulation Act was amended in last winter session
The Reserve Bank of India (RBI) will now be able slap a penalty of Rs 1 crore on banks if they breach a single norm. If more than one norm is breached, then the fine will be multiples of Rs 1 crore. Earlier, the fine was Rs 5 lakh for a single violation.
The new norm came into effect after Section 46 of the Banking Regulation Act was amended in the winter session of Parliament. However, the new penalty will be only charged if a norm is found to have been violated after the amendment was notified. It will not be applicable retrospectively. In the past, there were instances of RBI slapping a penalty of Rs 55 lakh, which means the bank was found violating the norms 11 times.
Fines have been imposed for contravening various norms such as know-your-customer (KYC), anti money-laundering and on foreign exchange derivatives, among others. Before imposing the fine, RBI has to serve a showcause notice to banks. A fine is imposed if the regulator is not satisfied with the reply to the showcause notice.
Last week, the Indian operations wing of US-based lender JPMorgan was fined Rs 5 lakh for violating norms related to risk management and inter-bank dealings in 2012.
JPMorgan is primarily involved in investment banking and corporate finance activity in India, through its only branch in Mumbai. It had applied to open one more branch in the country.
Last October, RBI slapped a penalty of Rs 30 lakh on ICICI Bank and Rs 55 lakh on ING Vysya Bank for violating certain norms related to KYC and anti-money-laundering, among others. In April 2011, RBI had imposed penalties on 19 commercial banks for contravention of various instructions issued by RBI in respect of derivatives, such as failure to carry out due diligence in regard to suitability of products and selling derivatives products to users not having risk management policies.
While a fine of Rs 15 lakh each was slapped on Axis Bank, Barclays, HDFC Bank, ICICI Bank, Kotak Mahindra and YES Bank, Rs 10 lakh each was imposed on Citibank, BNP Paribas, SBI, Credit Agricole-CIB, Development Credit Bank, ING Vysya Bank, Royal Bank of Scotland and Standard Chartered Bank.
The new norm came into effect after Section 46 of the Banking Regulation Act was amended in the winter session of Parliament. However, the new penalty will be only charged if a norm is found to have been violated after the amendment was notified. It will not be applicable retrospectively. In the past, there were instances of RBI slapping a penalty of Rs 55 lakh, which means the bank was found violating the norms 11 times.
Fines have been imposed for contravening various norms such as know-your-customer (KYC), anti money-laundering and on foreign exchange derivatives, among others. Before imposing the fine, RBI has to serve a showcause notice to banks. A fine is imposed if the regulator is not satisfied with the reply to the showcause notice.
Last week, the Indian operations wing of US-based lender JPMorgan was fined Rs 5 lakh for violating norms related to risk management and inter-bank dealings in 2012.
JPMorgan is primarily involved in investment banking and corporate finance activity in India, through its only branch in Mumbai. It had applied to open one more branch in the country.
Last October, RBI slapped a penalty of Rs 30 lakh on ICICI Bank and Rs 55 lakh on ING Vysya Bank for violating certain norms related to KYC and anti-money-laundering, among others. In April 2011, RBI had imposed penalties on 19 commercial banks for contravention of various instructions issued by RBI in respect of derivatives, such as failure to carry out due diligence in regard to suitability of products and selling derivatives products to users not having risk management policies.
While a fine of Rs 15 lakh each was slapped on Axis Bank, Barclays, HDFC Bank, ICICI Bank, Kotak Mahindra and YES Bank, Rs 10 lakh each was imposed on Citibank, BNP Paribas, SBI, Credit Agricole-CIB, Development Credit Bank, ING Vysya Bank, Royal Bank of Scotland and Standard Chartered Bank.
Impose penalty on banks not meeting MSME lending targets: Rae
Jan 27, 2013, 11.21AM IST
NEW DELHI: Banks not fulfilling MSME lending targets should be penalised, Ministry of Micro, Small and Medium Enterprises Secretary Vivek Rae has said.
Small units face challenges such as lack of access to finance, non-availability of collaterals and delayed realisation of receivables. There are over 26 million MSMEs in the country providing employment to around 60 million people.
"These units face financial exclusion from the banking system as lending targets for MSMEs, set by the RBI, are not being met by banks.
"Also, there is no mechanism to enforce the compliance with these targets. There is lack of accountability on part of banking system to achieve them," Rae said.
If banks don't deliver, there must be some sanctions on them and banks must be held accountable for not meeting the targets, he added.
As per the Reserve Bank of India norms, banks must achieve a 20 per cent year-on-year growth in credit to micro and small enterprises and a 10 per cent annual growth in the number of micro enterprise accounts.
Rae said there is only lip service being paid by the banking sector as there is "financial exclusion" and no financial inclusion in the MSME sector.
RBI to levy penalty on banks for violating customer info sharing norms Updated: Thursday, November 22 2012
The Reserve Bank of India (RBI), on Wednesday, said that lenders failing to comply with norms on 'sharing customer information among themselves' will have to face penalty from January 1, 2013. The move, which has been aimed at keeping a check on the rising NPAs, will require banks to share information relating to credit, derivatives and unhedged foreign currency exposures among themselves. For that, the central bank has asked the lenders to develop a proper information sharing mechanism by the end of this year, and any new loan sanctioned after January 1, 2013 should be done only after obtaining necessary information. "It has been observed that of late the NPAs and restructured loans of banks have been increasing significantly. A major reason for deterioration in the asset quality of banks is the lack of effective information sharing among banks," the central bank said. RBI cited the lack of adequate information sharing among banks would help significantly reduce the frauds in the system. "Non-adherence to the above instructions by banks would be viewed seriously by the Reserve Bank and they would be liable to action, including imposition of penalty, wherever considered appropriate," RBI added. Topics:
HSBC pays record $1.9bn fine to settle US money-laundering accusations
Bank guilty of 'blatant failure' to implement money-laundering controls and wilfully flouted sanctions, US prosecutors say
HSBC was guilty of a "blatant failure" to implement anti-money laundering controls and wilfully flouted US sanctions, American prosecutors said, as the bank was forced to pay a record $1.9bn (£1.2bn) to settle allegations it allowed terrorists to move money around the financial system.
Hours after the bank's chief executive, Stuart Gulliver, said he was "profoundly sorry" for the failures, assistant attorney general Lanny Breuer told a press conference in New York that Mexican drug traffickers deposited hundreds of thousands of dollars each day in HSBC accounts. At least $881m in drug trafficking money was laundered throughout the bank's accounts.
"HSBC is being held accountable for stunning failures of oversight – and worse," said Breuer, "that led the bank to permit narcotics traffickers and others to launder hundreds of millions of dollars through HSBC subsidiaries and to facilitate hundreds of millions more in transactions with sanctioned countries."
In Mexico the bank "severely understaffed" its compliance department and failed to implement an anti-money laundering programme despite evidence of serious risks. A complex scheme known as the black market peso exchange (BMPE) was used to launder the cash.
Manhattan district attorney Cyrus Vance said: "New York is the centre of international finance and those who use our banks as a vehicle for international crime will not be tolerated."
In the latest embarrassment for Britain's banks, Gulliver said: "We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again," he said, insisting Britain's biggest bank was "a fundamentally different organisation" now. It is the largest ever fine for such an offence and even greater than the £940m the bank had feared it faced after the allegations first surfaced in the summer in a report by the US Senate.
The fine for HSBC comes barely 24 hours after Standard Chartered paid £415m to US regulators, and as banks such as Royal Bank of Scotland and UBS brace for a wave of fines in coming days for attempting to rig Libor following the £290m penalty slapped on Barclays in June.
Gulliver was promoted to chief executive two years ago during a management reshuffle caused by the decision by Lord Green, the chairman, to quit to join the government as a trade minister.
The Department for Business, Innovation and Skills, which Green represents, said: "The report by the US Senate sub-committee sets out in detail the evidence submitted to it and the action taken by HSBC to ensure compliance with US regulations at the time that Lord Green was group chairman. At the time of the report's publication HSBC expressed its regret that there were failures of implementation and Lord Green has said that he shares that regret."
David Bagley, the bank's head of compliance, dramatically quit before the US Senate committee hearing into the case in July and, on Monday, HSBC named a former US official, Bob Werner, as head of group financial crime compliance, a newly created role, as the bank prepared for the fine related to drug allegations.
The penalty includes a five-year agreement with the US department of justice under which the bank will install an independent monitor to assess reformed internal controls. The bank's top executives will defer part of their bonuses for the whole of the five-year period, while bonuses have been clawed back from a number of former and current executives, including those in the US directly involved at the time.
HSBC has managed to avoid being criminally prosecuted – a move that could have stopped the bank operating in the US.
HSBC's share price rose by 2.8p to 644p despite the size of the fine. Ian Gordon, banks analyst at Investec, said the fine was slightly lower than the $2bn he had been pencilling in to his forecasts. But he said: "HSBC's settlement with the US authorities will include a deferred prosecution agreement with the department of justice of five years' duration. Given HSBC's ongoing US business and other continuing conduct investigations, this sword of Damocles is not without teeth, albeit based on what we know, we are regarding the $1.921bn settlement as de facto 'final'."
Gulliver stressed that the bank had co-operated with the US authorities. "Over the last two years, under new senior leadership, we have been taking concrete steps to put right what went wrong and to participate actively with government authorities in bringing to light and addressing these matters," he said.
"We are committed to protecting the integrity of the global financial system. To this end we will continue to work closely with governments and regulators around the world," he added.
The US Senate said the bank had operated a "pervasively polluted" culture that lasted for years, allowing HSBC to move billions around the financial system for Mexican drug lords, terrorists and governments on sanctions lists. HSBC's Mexican operations moved $7bn into the US operations, for instance, which the Senate was told was tied to drug money.
HSBC said it also expected to finalise an "undertaking" with the UK regulator, the Financial Services Authority, "shortly".
The bank has spent $290m on improving its systems to try to avoid a re-run of the events.
Rajat Gupta should pay $15 million penalty: US govt
NEW YORK: US government has asked a court to slap a maximum penalty of $15 million on India-born fallen Wall Street titan Rajat Gupta and permanently bar him from serving as director of any publicly-traded firm for his "terrible breach of trust" by indulging in insider trading.
Weeks after the former Goldman Sachs director was handed down a two-year jail term and fined $5 million by US District Judge Jed Rakoff, the US Securities and Exchange Commission (SEC) said he should be ordered to pay a maximum civil penalty of $15 million, which would be thrice the USD five million in gains and losses avoided as a result of his "illegal conduct."
Gupta, 63, who is set to begin his prison term in January, has filed an appeal against his conviction in the US Court of Appeals for the Second Circuit.
Weeks after the former Goldman Sachs director was handed down a two-year jail term and fined $5 million by US District Judge Jed Rakoff, the US Securities and Exchange Commission (SEC) said he should be ordered to pay a maximum civil penalty of $15 million, which would be thrice the USD five million in gains and losses avoided as a result of his "illegal conduct."
Gupta, 63, who is set to begin his prison term in January, has filed an appeal against his conviction in the US Court of Appeals for the Second Circuit.
http://timesofindia.indiatimes.com/business/international-business/Rajat-Gupta-should-pay-15-million-penalty-US-govt/articleshow/17244054.cms
RBI is contemplating hike in penalty to be imposed on Bank for their involvement in money laundering as exposed by Cobrapost through their sting operation. Penalty of rupee one crore is nothing but a drop in ocean. After all, the fine will be debited to expenditure account of the bank and not recovered from the CMD or ED or GM or DGM who inculcated bad culture for achievement of target and who used to fire branch head and officials for not achieving target and who failed to enforced discipline among officers.
Whatsoever may be the value of penalty, the burden of penalty imposed on banks by RBI will ultimately fall on customers,taxpayer and depositors money. The individuals who committed mistake and who have been consistently committing mistake for years together and who will continue to do so in future too will sleep as comfortably as he or she used to be before Cobrapost sting operation exposure.
Read details if you like by clicking on following link
RBI imposes Penalty on 19 Commercial Banks for Non-compliance of its instructions on Derivatives
The Reserve Bank of India has imposed penalties on 19 commercial banks, as detailed below, in exercise of the powers vested with it under the provisions of Section 47A(1)(b) read with Section 46(4)(i) of the Banking Regulation Act, 1949.
The penalties have been imposed on these banks for contravention of various instructions issued by the Reserve Bank in respect of derivatives, such as, failure to carry out due diligence in regard to suitability of products, selling derivative products to users not having risk management policies and not verifying the underlying/ adequacy of underlying and eligible limits under past performance route.
The Reserve Bank had issued Show Cause Notices to these banks. In response to this, the banks submitted their written replies. On a careful examination of the banks’ written replies and the oral submissions made during the personal hearings, the Reserve Bank found that the violations were established and the penalties were thus imposed.
Sl. No.
|
Name of banks
|
Penalty
(` in Lakh) |
1
| Axis Bank Ltd |
15.00
|
2
| Barclays Bank PLC |
15.00
|
3
| HDFC Bank Ltd |
15.00
|
4
| ICICI Bank Ltd |
15.00
|
5
| Kotak Mahindra Bank Limited |
15.00
|
6
| Yes Bank Ltd |
15.00
|
7
| BNP Paribas |
10.00
|
8
| Citi Bank NA |
10.00
|
9
| Credit Agricole - CIB |
10.00
|
10
| Development Credit Bank Ltd. |
10.00
|
11
| ING Vysya Bank Ltd |
10.00
|
12
| Royal Bank of Scotland |
10.00
|
13
| Standard Chartered Bank |
10.00
|
14
| State Bank of India |
10.00
|
15
| Bank of America NA |
5.00
|
16
| DBS Bank Ltd. |
5.00
|
17
| Deutsche Bank AG |
5.00
|
18
| Hongkong and Shanghai Banking Corporation Ltd. |
5.00
|
19
| JP Morgan Chase Bank NA |
5.00
|
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