Business / Axis Bank fined ₹25 lakh by RBI for violating KYC rules

Mumbai: The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹25 lakh on Axis Bank Limited for violation of rules, the central bank informed on Wednesday.

An order dated 1 September said the monetary penalty was imposed for “contravention of/non-compliance with certain provisions of directions issued by RBI contained in the Reserve Bank of India – (Know Your Customer (KYC)) Direction, 2016".

This action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

The penalty has been imposed in exercise of powers vested in RBI under provisions of section 47A(1)(c) read with section 46(4)(i) of the Banking Regulation Act, 1949 (the Act).

The RBI had carried out a scrutiny of Axis Bank last year in a customer account maintained with the bank and it was observed that the bank had failed to comply with the aforesaid directions issued by RBI, the regulator said.

“A scrutiny was carried out by RBI during February 2020 and March 2020 in a customer account maintained with the bank and it was observed that the bank had failed to comply with the aforesaid directions issued by RBI, ie., the bank failed to monitor/carry out on-going due diligence in the said account to ensure that the transactions were consistent with its knowledge about the customer, customer’s business and risk profile," the RBI statement read.

"In furtherance to the same, a notice was issued to the bank advising it to show cause why penalty should not be imposed on it for contravention of the said directions, as stated therein," the central bank said.

“After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of contravention of/non-compliance with the aforesaid RBI directions were substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with the aforesaid direction," it added.