RBI cracks down against Axis Bank, Indian Overseas Bank, imposes hefty monetary penalty

The Reserve Bank of India (RBI) on Monday, imposed penalty on private lender Axis Bank  and state-owned Indian Overseas Bank for non-compliance with directions issued by the central bank on Income Recognition and Asset Classification (IRAC) norms. RBI has imposed a Rs 3 crore penalty on Axis Bank, while on Indian Overseas Bank faces Rs 2 crore fine. This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949, taking into account failure of the bank to adhere to the aforesaid directions/guidelines issued by RBI.

RBI carried out inspection in Axis Bank for it's  financial position as on March 31, 2016. According to RBI, in case of Axis Bank, a Notice, dated November 16, 2017, 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. 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/ guidelines were substantiated and warranted imposition of monetary penalty.

It may be noted that gross non-performing assets (GNPA) of Axis Bank, increased by 22.15% to Rs 25,000.51 crore in Q3FY18 versus Rs 20,466.82 crore in Q3FY17. However, current quarter’s GNPA is down by 8.76% from Rs 27,402.32 crore in Q2FY18.

In percentage terms, GNPA of Axis Bank came in at 5.28% in Q3FY18 - sequentially up from 5.22% in Q3FY17, but lower if compared with 5.90% GNPA recorded in Q2FY17.
As for Indian Overseas Bank, RBI detected a fraud in one of the branches. 

RBI had examined IOB's documents, including the bank’s internal inspection report. It was revealed, inter alia, non-compliance with the directions issued by RBI on Know Your Customer (KYC) norms.

Based on the documents, a Notice was issued to the bank advising it to show cause as to why penalty should not be imposed for non-compliance with directions issued by RBI. 

Taking into considering the IOB's reply, oral and written submissions made in the personal hearing, as also the additional information and documents furnished, RBI came to the conclusion that the aforesaid charges of non-compliance with RBI directions/ guidelines were substantiated and warranted imposition of monetary penalty.