The Reserve Bank of India (RBI) has come down heavily on commercial banks after slapping a series of penalties for not complying with several regulatory guidelines.
Speaking at the FICCI-IBA banking seminar, RBI Deputy Governor in-charge of banking supervision M.K. Jain said that the compliance culture in the banking system was far from satisfactory.
‘Can benefit banks’
“It is important for banks to demonstrate good compliance culture… We appreciate the procedures to incorporate compliance culture,” Mr. Jain said, adding a good compliance culture can benefit the banks in many ways.
He said following the global financial crisis, the importance of compliance had increased significantly, particularly in the areas of know-your-customer, anti-money laundering and appropriateness of banking products, among others.
Between January and July this year, the banking regulator had imposed penalties worth about ₹122.9 crore on 70 occasions on banks for non-compliance, he said.
“A bank or a financial institution can suffer if it does not adhere to laws, rules, regulations and related self-regulatory standards or even codes of conducts applicable to its banking activities,” Mr. Jain said.
He also said some of the banking frauds — for which banks had suffered big losses — could have been avoided if they had had ‘good compliance culture’.