RBI Imposes Rs 1 Crore Penalty Each on Kotak Mahindra Bank, IndusInd Bank

The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs1.05 crore on Kotak Mahindra Bank and Rs1 crore on IndusInd Bank for violating the provisions of its regulations. Kotak Mahindra Bank was fined for non-compliance with directions on limiting liability of customers in unauthorised electronic banking transactions, and statutory and other restrictions governing loans and advances while IndusInd Bank was penalised for not following KYC (know your customer) directions.
In an order issued on Monday, the banking regulator imposed a monetary penalty on Kotak Mahindra Bank for contravention of the provisions of banking regulations and non-compliance with customer protection guidelines.
As per the banking regulator, the RBI has imposed a penalty on Kotak Mahindra Bank for contravention of the provisions of sub-section (2) of Section 26A of the Banking Regulation Act, 1949 (the Act) read with paragraph 3 of ‘The Depositor Education and Awareness Fund Scheme, 2014’ and for non-compliance with the directions on ‘Customer Protection – Limiting Liability of Customers in Unauthorised Electronic Banking Transactions’, and ‘Loans and Advances – Statutory and Other Restrictions.
The RBI has also penalised IndusInd Bank for non-compliance with certain directions issued by RBI on ‘Reserve Bank of India KYC Directions, 2016’.
Both banks were issued notices asking them to show cause as to why penalties should not be imposed on them.
The RBI stressed that these penalties are based on deficiencies in regulatory compliance and are not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers, it noted.
The central bank added that “the statutory inspection for supervisory evaluation of the banks was conducted by RBI with reference to its financial positions as on 31 March 2018 and 31 March 2019.”



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Changes in Our Business Model
25th Sept 2020
Greetings from Moneylife Advisory Services
Between financial years 2019-21, SEBI has come up with extensive changes to investor advisor regulations. On Sep 23, 2020, SEBI had issued new additional guidelines. This comes just two months after extensive changes announced in July 2020. Earlier, in December 2019 there was an ad hoc circular
As a result of these changes, IAs, cannot accept fees through credit cards, will have to sign a 26-clause investor agreement, have to maintain physical record written & signed by client, telephone recording, emails, SMS messages and any other legally verifiable record for five years. IAs were already asked to record the suitability and rationale for every piece of advice given, sign them and store them for five years.
While these extensive and frequent changes, designed to strengthen the conduct of IAs are well-meaning, these have sharply increased compliance efforts and cost. We, being online advisors, find many of changes harder to implement, compared to advisors working in the physical space. We will have to have an army of advisors, administrative and tech staff to be compliant. If we do this, we will have to divert money to these areas and the cost of our service will double. We want to remain the least-cost service in the market to benefit more and more people. In the circumstances, we are forced to change our business model from “advisory” to “research”. This will mean the following:
What remains the same:
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What changes:
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Over the next few weeks our site and our communication to you will reflect these and other additional changes.
We feel this will not affect you much in terms of what really matters in investing: knowing what to buy and when to buy. This is our edge and it will still be available to you.
Debashis Basu