Srinagar, June 23: The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs 2.5 crore on Jammu and Kashmir Bank Limited for failing to comply with some of the directions issued by the RBI.
According to RBI officials, the bank failed to ensure the integrity and quality of data submitted to Central Repository of Information on Large Credits (CRILC), extended term loans without adequate due diligence on the viability and bankability of the projects, and created financial/non-financial messages in SWIFT without ensuring that the underlying transactions were duly reflected in the Core Banking System (CBS).
According to an RBI Communication issued by Chief General Manager Yogesh Dayal the penalty is in relation to non-compliance with regulations concerning the creation of a Central Repository of Large Common Exposures-Across Banks, CRILC reporting, restrictions on loans and advances, and ‘Time-bound implementation and strengthening of SWIFT-related operational controls.
The penalty has been imposed under the provisions of section 47 A (1) (c) read with section 46 (4) (i) of the Banking Regulation Act, 1949.
The RBI's action is based on the bank's deficiencies in regulatory compliance and “should not be interpreted as a judgment on the validity of any transactions or agreements made by the bank with its customers,” reads the statement issued by the RBI.
RBI had earlier conducted a Statutory Inspection for Supervisory Evaluation (lSE 2021) of the bank with reference to its financial position as on March 31, 2021.
Officials said the examination of the Risk Assessment Report and Inspection Report pertaining to the ISE 2021 and all related correspondences in that regard revealed non-compliance with the RBI directions by the JK bank to the extent that it failed to ensure integrity and quality of data submitted to CRILC.
Officials said the bank failed to extend term loans to a corporation without undertaking due diligence on the viability and bankability of the projects to ensure that revenue streams from the projects are sufficient to take care of the debt servicing obligations.
The bank also failed to ensure that the repayment/servicing of said term loans was not made out of budgetary resources .
It was revealed that the bank also created financial and non-financial messages in SWIFT without first ensuring that the underlying transactions have been duly reflected in the CBS.
“In furtherance to the same, a notice was 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 said directions, as stated therein,” RBI Chief General Manager Yogesh Dayal said.
After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of non-compliance with the RBI directions was substantiated and warranted imposition of monetary penalty of Rs 2.5 Crores.
