RBI Slaps ₹58.9-crore Penalty On ICICI Bank For Violating Security Sale Guidelines

The Reserve Bank of India has slapped a monetary penalty of ₹58.9 crore on ICICI Bank for non-compliance with regulatory directions on direct sale of securities from the bank’s Held To Maturity (HTM) portfolio and specified disclosure in this regard.

The is probably the highest penalty that the regulator has imposed on a commercial bank in recent times.

The central bank said in a statement that the penalty was imposed in exercise of powers vested in it under the provisions of the Banking Regulation Act, 1949, taking into account the failure of the bank to adhere to its directions/guidelines.

“This action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers,” the RBI said.

‘Genuine misunderstanding’

Meanwhile, ICICI Bank said in a statement that the RBI imposed the penalty for continued sale of government securities classified as HTM.

“ICICI Bank had continued with the sales from HTM category for a few weeks during the quarter ended March 31, 2017, due to a genuine misunderstanding on the timing of the applicability of the RBI’s direction in this matter,” it said.

According to the RBI, investments classified under HTM need not be marked to market and are carried at acquisition cost, unless it is more than the face value, in which case, the premium is amortised over the period remaining to maturity.

“As per RBI guidelines, the bank had disclosed in its annual report for FY2017 that it had sold more than five per cent of investments categorised as HTM,” the private sector bank said.

However, the bank added that it had not made the specified additional disclosure at that time.

The lender elaborated that it has subsequently been making the specified disclosure, as directed by the RBI, in the audited financial results since the quarter ended June 30, 2017.

In the current year (FY2018), the bank has sold less than give per cent of securities from its HTM portfolio, according to the statement.

The bank emphasised that it continues to give utmost importance to regulatory compliance and endeavours to meet supervisory expectations.

Loans to Videocon

On Wednesday 28, ICICI Bank’s board scotched rumours of any favouritism, nepotism or quid pro quo in the sanction and disbursal of loans to the Videocon group. The board also expressed full confidence and faith in the leadership of its MD and CEO Chanda Kochhar.

The board had met against the backdrop of concerns that resurfaced over the sanctioning of loans to the debt-laden Videocon group.