RBI Imposes ₹1 Crore Penalty on ICICI Bank for Loans and Advances Compliance Failures

The Reserve Bank of India imposed a monetary penalty of ₹1.00 crore on ICICI Bank Ltd by an order dated 21 May 2024, following the bank's non-compliance with directions on Loans and Advances — Statutory and Other Restrictions. The central bank confirmed that the violations were identified during a Statutory Inspection for Supervisory Evaluation, known as ISE 2022, which assessed the bank's financial position as at 31 March 2022.

In its communication accompanying the order, the regulator stated that the action is based on deficiencies in regulatory compliance and does not pronounce upon the legitimacy of any particular transaction conducted between ICICI Bank and its customers during the inspection period.

SCOPE OF THE COMPLIANCE BREACHES

The RBI's directions on Loans and Advances — Statutory and Other Restrictions include conditions on bank financing of government-linked projects. The RBI found that ICICI Bank had sanctioned term loans to certain entities in lieu of, or to substitute, budgetary resources envisaged for certain projects; without due diligence on the viability and bankability of the projects; where repayment was made out of budgetary resources; and without ensuring the proposals were for specific monitorable projects. The ISE 2022 inspection, which examined ICICI Bank's position as at the close of its financial year ending 31 March 2022, identified instances of non-compliance with those requirements that the RBI determined warranted a formal penalty.

YES BANK PENALISED IN SEPARATE ORDER

In a related development, the RBI imposed a penalty of ₹91 lakh on Yes Bank Ltd by a separate order dated 17 May 2024. The Yes Bank action covered non-compliance with two distinct sets of RBI directions: those governing Customer Service in Banks, and those addressing the Unauthorised Operation of Internal and Office Accounts.