MUMBAI: The Reserve Bank of India (RBI) said on Friday it has imposed a monetary penalty of Rs 5.72 crore on Federal Bank Limited for non-compliance with the central bank's direction related to the delivery of financial services.
The monetary penalty has been imposed through an RBI order dated 7th July. Federal Bank of India has been penalised for non-compliance with the provisions of 'Reserve Bank of India (Financial Services provided by Banks) Directions, 2016' issued by RBI.
"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 RBI said in a statement.
The Statutory Inspection for Supervisory Evaluation (lSE) of the bank was conducted by the RBI with reference to the bank's financial position as on March 31, 2020 and the subsequent supervisory assessment carried out by RBI, and examination of the Risk Assessment Report, Scrutiny Report and all related correspondence pertaining to the same, revealed, inter alia, non-compliance with the aforesaid RBI directions to the extent the bank failed to ensure that no incentive (cash or non-cash) was paid to its staff engaged in insurance broking/corporate agency services by the insurance company.
In furtherance to the same, a notice was issued to the bank advising it to show cause as to why a penalty should not be imposed on it for failure to comply with the said directions, as stated therein.
After considering the bank's reply to the notice and oral submissions made in the personal hearing, RBI came to the conclusion that the aforesaid charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with such directions, the RBI said.