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Why RBI imposed Rs 1 crore penalty each on Mobikwik, Spice Money

The RBI imposed penalties also on two cooperative banks for deficiencies in regulatory compliance, of which MUFG Bank has to cough up Rs 30 lakh

The Reserve Bank of India (RBI) has imposed a penalty of Rs 1 crore each on One Mobikwik Systems and Spice Money for violation of norms on net worth requirement provided by the regulator for Bill Operating Units. After an inquiry, it has been found that the two payment system operators were in violation of norms.

As these were offences of the referred to in a Section of the and Settlement Systems Act, 2007, notices were issued to the entities.

Readers may study the and Settlement Systems Act, 2007, from the following PDF:

The penalties have been imposed in the exercise of powers vested in RBI under the provisions of Section 30 of the PSS Act. “These actions 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 entities with their customers,” said RBI.

“It was observed that the above entities had not complied with the directions issued by RBI on the net-worth requirement for Bill Operating Units (BBPOUs). As these were offences of the referred to in Section 26 (6) of the PSS Act, notices were issued to the entities. After reviewing their written responses and the oral submissions made during the personal hearing, RBI concluded that the aforesaid charges of non-compliance with RBI directions were substantiated and warranted imposition of monetary penalty,” said the RBI.

“These actions 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 entities with their customers,” RBI said in a release.

“After reviewing their written responses and the oral submissions made during the personal hearing, the RBI concluded that the aforesaid charges of non-compliance with the RBI directions were substantiated and warranted imposition of monetary penalty,” it said.

The RBI, however, added that the 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 entities with their customers. 

The RBI said today it had imposed a penalty of Rs 30 lakh on MUFG Bank Ltd for non-compliance with the directions issued by it on “Loans and Advances — Statutory and Other Restrictions”. The central bank has also imposed penalties on two cooperative banks for deficiencies in regulatory compliance. MUFG Bank was earlier known as The Bank of Tokyo-Mitsubishi UFJ, Ltd.

The RBI said the statutory inspection for supervisory evaluation of MUFG Bank, with reference to its financial position as of 31 March 2019, revealed, inter alia, non-compliance with the direction to the extent that the bank had sanctioned loans and advances to companies whose board of directors included person(s) who were director(s) on boards of other banks, without such sanctions being accorded at the level of its Management Committee. A notice was issued to the bank.

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