In both the cases, the RBI said the actions are based on deficiencies in regulatory compliance and are not intended to pronounce upon the validity of any transaction or agreement entered into by the entities with their customers.
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RBI Action: The Reserve Bank of India has imposed a fine of Rs 66.6 lakh on Hong Kong and Shanghai Banking Corporation Limited (HSBC) for violating the rules. Apart from this, IIFL Samasta Finance Limited has been fined more than Rs 33 lakh. In both the cases, the Reserve Bank said that this action is based on deficiencies in regulatory compliance and is not intended to pronounce judgement on the validity of any transaction or agreement entered into by the entities with their customers.
What is the reason for the action
The Reserve Bank said that it has imposed a fine of Rs 66.6 lakh on Hong Kong and Shanghai Banking Corporation Limited for not following the instructions related to KYC and interest rate on deposits. Apart from this, a fine of Rs 33.1 lakh has also been imposed on IIFL Samasta Finance Limited for not following certain provisions of ‘Non-Banking Financial Company – Systemically Important Non-Deposit Taking Company and Deposit Taking Company (Reserve Bank) Directions, 2016’ and Know Your Customer (KYC) instructions.
Notice issued
RBI said that it had inspected the financial position of HSBC as of March 31, 2023, in which deficiencies were found in regulatory compliance. After this a show cause notice was issued to the bank. During the investigation it became clear that the bank had outsourced the task of settling anti-money laundering (AML) alerts to its group company. Unsecured foreign exchange risks of some borrowers were not reported to credit information companies and savings deposit accounts were opened in the name of some ineligible entities.
In the case of IIFL Samasta
The RBI said that it had inspected the financial position of the company as of March 31, 2023, in which deficiencies were found in regulatory compliance. After this a show cause notice was issued to the company. During the investigation, it was found that the company had charged interest from some borrowers for the period prior to the date of loan disbursement or cheque issuance, in violation of RBI’s ‘Code of Fair Conduct’ instructions. Apart from this, the company failed to classify some loan accounts with dues of 90 days or more as non-performing assets (NPAs).
