In a recent move, Yes Bank and ICICI Bank have been penalized by the Reserve Bank of India (RBI) ensuring fairness in banking. In the former case, a penalty of Rs 91 lakh imposed on Yes Bank because they were charging on zero-balance accounts as well as some other matters which were unspecified. The latter has project loan-related irregularities raising the penalty to around Rs 1crore.
An RBI investigation uncovered that Yes Bank levied charges on accounts where the balance had depleted to zero, contradicting established norms. RBI guidelines dictate that banks can only charge for services when there’s a balance in the account. Upon reaching zero, the bank should suspend services, preventing the account from slipping into negative territory solely due to non-maintenance charges. Additionally, Yes Bank was found to have opened internal accounts under customer names for unauthorized purposes like parking funds and routing transactions, further breaching RBI regulations.
Meanwhile ICICI was penalized after unearthing of improper loan practices. The bank was found to be issuing long-term loans to some borrowers without a thorough investigating the project’s financial health. These loans were aimed to replace government funding, but ICICI failed to confirm the project’s ability to generate enough revenue to repay the loans.
These penalties underscore the RBI’s commitment to stringent oversight and regulatory compliance within the banking sector. This serve as a reminder to financial institutions of adhering to established norms to maintain the integrity and stability of the banking system.
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The penalties stem from a statutory inspection conducted during the RBI’s supervisory evaluation for the 2022 fiscal year. This inspection aimed to ensure banks operate within established regulations and that any deviations are promptly addressed.
The RBI’s action highlights its crucial role in safeguarding customer interests and maintaining the overall health of the banking industry. Banks are expected to meticulously follow guidelines, ensuring fair practices and protecting customers from unauthorized or unfair charges.
This move by RBI will serve as a reminder to account holders in both Yes or ICICI Banks that there is need for to be concerned within the sector of finance services perpetuated by Central Bank aimed at promoting fair dealings in such institution.
