The Reserve Bank of India (RBI) has, by an order dated 18 October 2021, imposed a monetary penalty of ₹1.95 crore (Rupees One Crore and Ninety-five Lakh only) on Standard Chartered Bank - India (the bank) for non-compliance with the directions issued by RBI on ‘Customer Protection – Limiting Liability of Customers in Unauthorised Electronic Banking Transactions’, ‘Cyber Security Framework in Banks’, ‘Credit Card Operations of banks’ read with ‘Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks’ and ‘Creation of a Central Repository of Large Common Exposures - Across Banks’ read with ‘Central Repository of Information on Large Credits (CRILC) – Revision in Reporting’. This penalty has been imposed in the exercise of powers vested in RBI under the provisions of section 47A(1)(c) read with section 46(4)(i) of the Banking Regulation Act, 1949.
This action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.
The Statutory Inspection for Supervisory Evaluation (ISE) of the bank was conducted by RBI with reference to its financial position as of 31 March 2020, and the examination of the Risk Assessment Report, Inspection Report and all related correspondence pertaining to the same, revealed, inter-alia, non-compliance with the above-mentioned directions to the extent of:
failure to credit (shadow reversal) the amount involved in the unauthorised electronic transactions,
not reporting cyber security incidents within the prescribed time period,
authorising the direct sales agents (outsourced third party) to conduct KYC verification, and
failure to ensure integrity and quality of data submitted in CRILC.
In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for contravention of/ non-compliance with the aforesaid directions, as stated therein.
After considering the bank’s replies to the notice, oral submissions made during the personal hearing, and additional submissions made by the bank, RBI came to the conclusion that the charge of contravention of/ non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty on the bank, to the extent of non-compliance with the aforesaid directions.
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