Reserve Bank on Friday imposed a penalty of Rs 2.20 crore on state-owned Indian Overseas Bank (IOB) for non-compliance of income recognition and other deficiencies in regulatory compliance. The fine is imposed for contravention of the provisions of certain directions issued by RBI on ‘Prudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining to Advances – Divergence in NPA Accounts’, ‘Reserve Bank of India (Interest Rate on Deposits) Directions, 2016’ and Advisory on ‘Man in the Middle (MiTM) Attacks in ATMs’.
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, RBI said. The statutory Inspection for Supervisory Evaluation of the bank (ISE 2021) was conducted by RBI with reference to its financial position as on March 31, 2021, it said.
The Chennai-based bank failed to make minimum mandatory transfer of a sum equivalent to 25 per cent of its disclosed profit for the year 2020-21 to its reserve fund, it said.There was significant divergence between the NPAs, as reported by it and as assessed by the inspection, and it offered interest on deposits of non-individual constituents at rates applicable to senior/super senior citizens, in certain instances.
Besides, the bank failed to implement control measures for ATMs relating to end-to-end encryption of communication between the ATM terminal/PC and the ATM Switch, within the timelines prescribed. Two notices were issued to the bank advising it to show cause as to why penalty should not be imposed on it for failure to comply with the provisions of the Act and the directions issued by RBI. After considering the bank’s replies to the notices, oral submissions made during the personal hearing and examination of additional submissions made by it, RBI came to the conclusion that the charges of contravention/ non-compliance were substantiated and warranted imposition of monetary penalty on the bank, it said.
