MUMBAI: Half a dozen public and private sector banks have been slapped with monetary penalties by the Reserve Bank of India for non-compliance of directions in the Swift (Society for Worldwide Interbank Financial Telecommunications) messaging system used by banks worldwide for foreign currency transfers.
On Tuesday ICICI Bank, Yes Bank and Allahabad Bank, in separate regulatory filings, informed stock exchanges of the RBI penalty. RBI had on Monday levied fines for similar violations on three other banks.
Allahabad Bank said RBI has imposed Rs 2 crore fine for “non-compliance of the RBI direction on February 20, 2018, pertaining to a reconciliation of Nostro on ‘real-time’ basis with immediate effect”.
Nostro accounts are the ones banks hold with other banks in foreign currency for foreign exchange transactions. According to RBI, ‘real-time’ in case of Nostro account would mean T+1 for debits and T+5 for credits.
Allahabad Bank said the penalty was not material considering the size of the bank and that it has taken measures to comply with the RBI direction.
Yes and ICICI banks were slapped with fines of Rs 1 crore each.
“The penalty has been levied for delay in compliance to RBI’s directives on Time-bound implementation & strengthening of SWIFT-related controls,” ICICI Bank said.
Yes Bank said the fine was for “non-compliance of Regulatory directions observed during the assessment of the implementation of SWIFT-related operational controls”.
While the penalties may be paltry compared to the size of the banks, it is significant that six banks have been fined for Swift related compliance. RBI, according to reports, had started inspection of banks’ Swift transactions, which was till then be part of the individual bank’s internal audit, after the Rs 14,000 crore Punjab National Bank fraud last year. The Nirav Modi scandal at PNB using the Swift transactions brought to light the misuse of the system and lack of controls.
Post the PNB fraud, the focus fell on the control over Swift messages and the reconciliation of Nostro accounts. On Monday, RBI levied Rs 4 crore fine on Karnataka Bank, Rs 3 crore on United Bank of India and Rs 1 crore on Karur Vysya Bank.
Focus fell on ‘swift’ post-PNB scam
Swift messaging system is used by banks worldwide for foreign currency transfers.
RBI had started inspection of banks’ Swift transactions post the PNB fraud last year brought out misuse of the system.
The central bank imposed penalties on ICICI Bank, Yes Bank and Allahabad Bank on Tuesday for non-compliance with its directions on Swift system.
It has fined Karnataka Bank, United Bank of India and Karur Vysya Bank for violations of the same on Monday.