The Reserve Bank of India (RBI) announced penalties against private sector banks Yes Bank and ICICI Bank for failing to adhere to regulatory guidelines. The penalty on Yes Bank amounts to Rs 91 lakh, while ICICI Bank faces a fine of Rs 1 crore.

Yes Bank

Yes Bank was penalized for charging customers for not maintaining minimum balances in certain savings accounts that had insufficient or zero balances, which contravenes RBI guidelines. Additionally, the bank operated internal accounts under customers’ names for unauthorized purposes, including parking funds and routing transactions.

ICICI Bank

ICICI Bank’s penalty stems from granting term loans to entities as substitutes for budgetary resources for specific projects. The bank failed to conduct due diligence to verify the viability and revenue streams of these projects to ensure they could service the debt. RBI inspections revealed that the loans were serviced using budgetary resources instead of project revenues. Furthermore, ICICI Bank did not ensure that the loans were for specific, monitorable projects.

Lapses Discovered in FY22

The penalties were based on findings from the RBI’s statutory inspection for supervisory evaluation of the banks’ financial positions for the fiscal year 2022. Following the inspection, the RBI issued notices to both banks, requesting explanations as to why penalties should not be imposed. After reviewing their responses, the RBI concluded that the banks’ lapses warranted the penalties.