Industrial Credit and Investment Corporation of India (ICICI), a bank with around 6,034 branches in India has been fined Rs 12.2 Crore by RBI for violation of lending rules and time lapses in reporting fraud.
Non-compliance to BRA 1949
- During a routine audit, it was revealed that ICICI’s financial records indicated that loans had been extended to companies in which ICICI Directors also served as members of the board.
- The bank was also involved in the marketing of Non-financial products.
- Failure to report fraudulent activity over the prescribed time is a major irregularity in direct non-compliance to RBI norms.
Due to these three charges, a penalty of 12.2 crore is levied on the private bank.
Kotak Mahindra Bank was also fined Rs 4 crore over charges of violation of risk management, loan recovery and management, and outsourcing issues.
Irregularities over the Recovery of loans
- Consumers must not be contacted after 7 p.m. and before 7 a.m. for loan recovery
- The rate of interest in loans must be calculated from the date of loan disbursement rather than the date of approval. Both ICICI and Kotak Mahindra violated this rule as per RBI guidelines.
- A prepayment levy on small borrowers was levied though no such provision is available in loan terms.
After hearing from both banks, RBI stood by its decision and validated its result.
The prevalence of RBI as a regulatory authority safeguards the interests of consumers and streamlines the maintenance of private banks. Consumers must read the terms of loans clearly before entering into any agreement. This is a stark reminder that consumers who hold accounts in private banks must be cautious and if are subject to any malpractices by the officials must report it to RBI authorities immediately.