April 12: The Reserve Bank of India has imposed a penalty of Rs 3 crore on state-owned IDBI Bank for non-compliance with outlined norms related to reporting of bad loans. In an official notice, the central banking institution stated that the penalty was imposed on account of non-compliance with the directions issued on Income Recognition and Asset Classification (IRAC) norms.
The penalty has been imposed in exercise of powers vested in the RBI under the provisions of Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949. RBI also clarified the penalty imposition wasn’t intended to pronounce upon the validity of transactions and agreements entered into by the bank with its customers, adding that the action was based on deficiencies in regulatory compliance.
Reports said that in a regulatory filing, IDBI has said that the action would not produce any material impact on the performance of the bank. The bank also stated that it would continue to improve its activities, adding that the internal monitoring would be fortified.
The penalty is among the biggest imposed by RBI over state-run banks for non-compliance with directions issued on Income Recognition and Asset Classification (IRAC) norms. Prior to this, the central institute had fined Axis Bank with Rs 3 crore for non-compliance with its directions on Income Recognition and Asset Classification (IRAC) norms back in fiscal 2016.
The biggest fine however was slapped upon Yes Bank during October 2016, when the private bank was slapped with a penalty of Rs 6 crore for diverges in NPA classification. Subsequently, banks like SBI and HDFC Bank have stepped forward by disclosing their divergences.
IDBI Bank was also the first bank to have fallen under the Prompt Corrective Action (PCA) based on bad loans and return on assets. Following the tightening of measures over bad loans, RBI invoked prompt corrective action on the bank during May last year.