COMPLIANCE CULTURE IN BANKS
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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.
- 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.
- 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.
- In March 2019, RBI imposed penalties worth Rs 71 crore on 36 public, private and foreign banks for non-compliance with various directions on time-bound implementation and strengthening of SWIFT operations.
- In August 2019, RBI issued a notice for Rs 8.5 crore fine on eleven banks for not complying with fraud reporting.
- Some of the weaknesses and irregularities observed have been recurring, in spite of affirmation by bank managements that they have carried out remediation.
- RBI Deputy Governor in-charge M.K. Jain, stressed on the need for banks to demonstrate good compliance culture.
- 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.
- He cautioned that 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.
- He highlighted the fact that some of the banking frauds — for which banks had suffered big losses — could have been avoided if they had had ‘good compliance culture’.
- It was also said that trust generates hidden earnings, which most banks don’t bother to quantify and hence, don’t realise.
- For many banks, translating the broader risk management framework to a centralized and fundamental process can be daunting. Many still struggle with primary control issues such as compliance literacy, accountability, performance incentives and risk culture.
- Creating a clear link to the bank’s overarching compliance protocol and implementing the right technology backbone that supports their initiatives can create the cultural and structural changes needed to compete in a new time and a new era of compliance.
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