The Reserve Bank of India (RBI) has fined Axis Bank Limited Rs. 25 lakh for breaking the regulations, the federal bank said on Wednesday. The monetary penalty was imposed on 1 September for "contravention of/non-compliance with certain terms of RBI directives included in the Reserve Bank of India – (Know Your Customer (KYC) Direction, 2016," according to an order.
This action is based on regulatory compliance issues and is not meant to be a judgement on the legality of any transaction or agreement between the bank and its clients. The penalty was levied by RBI in the exercise of its powers under section 47A(1)(c) and section 46(4)(i) of the Banking Regulation Act, 1949. (The Act). Last year, the RBI conducted a review of Axis Bank in a client account held by the bank, and it was discovered that the bank had failed to follow the RBI's instructions, according to the regulator.
“During February and March 2020, RBI conducted a review of a customer account held by the bank, and it was discovered that the bank had failed to comply with the aforementioned RBI directives i.e. the bank "failed to monitor/carry out ongoing due diligence on the stated account to verify that the transactions were consistent with its understanding of the client, customer's company, and risk profile," according to the RBI statement.
According to the central bank, a notice was sent to the bank, instructing it to show the reason why no penalty should be imposed on it for violating the abovementioned directives, as indicated therein. RBI concluded that the charge of contravention of/non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with the aforesaid direction, after considering the bank's response to the notice and oral submissions made during the personal hearing, it added.