The Reserve Bank of India (RBI), has imposed a penalty of Rs 5.72 crore on Federal Bank Ltd and Rs 70 lakh on Bank of India for violating the provisions of its guidelines. Fine of Rs 7.60 lakh is imposed on Dhani Loans and Services Ltd also.
RBI has imposed the penalty in the exercise of powers under the provisions of section 47 A (1) (c) read with section 46 (4) (i) of the Banking Regulation Act, 1949. The decision on penalties is based on deficiencies in regulatory compliance
RBI has issued Know Your Customer (KYC) Norms which the Banks are obliged to comply with while onboarding any new customer in form of a direct consumer or a guarantor. The need for stringent KYC is felt as any loophole can lead to money laundering which may be used for terrorism and anti-national activities.
The government though RBI gives utmost importance to the KYC exercise. Not only new customers but existing customers too are required to renew their KYC credentials at pre-defined intervals according to their type.
Not Understanding this mandate, often the irritated customers are found complaining to the Banks for asking the KYC again.