Reserve Bank of India (RBI) is the apex bank of India that regulates the conduct of various commercial banks of India. If these commercial banks are found deviant they are also penalized by RBI.Recently, RBI has imposed penalties upon 19 commercial banks like Axis Bank Ltd, Barclays Bank PLC, HDFC Bank Ltd, ICICI Bank Ltd, Kotak Mahindra Bank Limited, Yes Bank Ltd, BNP Paribas, Citi Bank NA, Credit Agricole – CIB, Development Credit Bank Ltd, ING Vysya Bank Ltd, Royal Bank of Scotland, Standard Chartered Bank, State Bank of India, Bank of America NA, DBS Bank Ltd, Deutsche Bank AG, Hongkong and Shanghai Banking Corporation Ltd and JP Morgan Chase Bank NA.
By exercising its powers under the provisions of Section 47A (1) (b) read with Section 46(4) (i) of the Banking Regulation Act, 1949, RBI imposed these penalties. The penalties have been imposed on these banks for contravention of various instructions issued by the Reserve Bank in respect of derivatives, such as, failure to carry out due diligence in regard to suitability of products, selling derivative products to users not having risk management policies and not verifying the underlying/ adequacy of underlying and eligible limits under past performance route.
The Reserve Bank had issued Show Cause Notices to these banks. In response to this, the banks submitted their written replies. On a careful examination of the banks’ written replies and the oral submissions made during the personal hearings, the Reserve Bank found that the violations were established and the penalties were thus imposed.
RBI has been taking many pro active reforms for the Banking Sector of India, says Praveen Dalal, managing partner of New Delhi base ICT law firm Perry4Law and leading cyber law expert of India.. RBI is not only ensuring strict compliance with various Laws, Regulations and Norms but is also prescribing various Policies and Strategies for Effective and Secure Banking in India, informs Dalal. Ensuring Cyber Security for preventing Cyber Crimes has been recently directed by RBI that all Commercial Banks of India must follow, informs Dalal.
However, although the directions of cyber security are of great interest yet banks have failed to comply with the same. For instance, till now the directions of RBI to appoint CIOs and steering committee has not been followed by banks of India. Similarly, banks of India are also at fault for ignoring the cyber security requirements.
RBI must take these non compliances very seriously as banking customers interest are at stake. Just like it imposed penalties for non compliance in the present case, penalties for non compliance with cyber security requirements must also be imposed by RBI. Let us see how RBI would react to this situation.
