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Indian Overseas Bank Penalised Rs 2.2 Cr By RBI For Non-compliance

The regulatory actions were taken following the RBI's statutory Inspection for Supervisory Evaluation

Photo Credit : shutterstock


Chennai-based Indian Overseas Bank (IOB) has been fined Rs 2.2 crore by the Reserve Bank of India (RBI) for non-compliance with income recognition norms and other regulatory deficiencies. The penalty was imposed as a result of the bank's failure to adhere to certain directions issued by the RBI.

The regulatory actions were taken following the RBI's statutory Inspection for Supervisory Evaluation (ISE 2021), which assessed IOB's financial position as of 31 March 2021. The inspection revealed significant deviations between the bank's reported Non-Performing Assets (NPAs) and the figures assessed during the inspection.

Additionally, the RBI found that IOB had offered interest rates on deposits to non-individual constituents that were applicable to senior and super senior citizens in certain instances. This contravened the RBI's "Reserve Bank of India (Interest Rate on Deposits) Directions, 2016."

Furthermore, the bank failed to implement control measures for Automated Teller Machines (ATMs) concerning end-to-end encryption of communication between the ATM terminal/PC and the ATM Switch within the stipulated timelines. The RBI had issued an advisory on "Man in the Middle (MiTM) Attacks in ATMs," urging banks to strengthen their security measures.

Another violation identified was IOB's failure to transfer a minimum sum equivalent to 25 per cent of its disclosed profit for the year 2020-21 to its reserve fund, as required by regulatory norms.

The RBI had issued two notices to IOB, asking for an explanation as to why a penalty should not be imposed for the bank's failure to comply with the provisions of the Act and the directions issued by the RBI. After considering the bank's responses, oral submissions during the personal hearing, and additional submissions, the RBI concluded that the charges of non-compliance were substantiated and warranted the imposition of a monetary penalty.

It is important to note that the regulatory action taken by the RBI is solely based on deficiencies in regulatory compliance and does not pass judgment on the validity of any specific transactions or agreements made by the bank with its customers.

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indian overseas bank Reserve Bank of India (RBI)