The Reserve Bank of India (RBI), India’s central bank, has penalized two major banks, ICICI Bank and YES Bank, for not following the rules. The announcement came on May 27, 2024, highlighting serious mistakes made by both banks.
ICICI Bank’s Penalty
ICICI Bank was fined ₹1 crore . The penalty was given because the bank approved long-term loans (called term loans) to some companies without properly checking if the projects these loans would fund were realistic and could make enough money to repay the debt. Normally, banks give loans only if they believe the borrower can pay them back. In this case, ICICI didn’t check carefully enough, and the RBI found fault.
The RBI also said that ICICI Bank relied on the government to pay back the loans instead of making sure the projects themselves would generate enough income. This is against the RBI’s rules because banks should lend money based on a business plan, not on government support.
YES Bank’s Penalty
YES Bank was fined ₹91 lakh for two separate issues.
First, the bank charged fees to customers with savings accounts that didn’t have the minimum required balance. The RBI has rules about what banks can charge customers, and these fees went against those rules.
Second, YES Bank opened and used internal accounts in the names of customers without their permission. These accounts were then used for activities they shouldn’t have been used for, like keeping extra money or moving customer funds around. This is a serious breach of trust and puts customer money at risk.
What This Means
The RBI is responsible for making sure banks follow the rules and operate safely. These penalties are a way to tell ICICI Bank and YES Bank that they made mistakes and need to improve their practices.
It’s important to note that the RBI said the penalties are for not following the rules, and it doesn’t mean the specific transactions between the banks and their customers were illegal.
Why This Matters
A strong and healthy banking system is important for India’s economy. When banks follow the rules, it helps to protect customers’ money and ensures that the banking system is stable. These penalties show that the RBI is taking action to make sure banks are following the rules and protecting their customers.