The Reserve Bank of India (RBI) deputy governor MK Jain has said that the increased number of frauds and fines are the result of banks poor compliance with regulations.
In some cases, the lack of compliance has been recurring, wherein banks have also ignored RBI’s instructions to commit the same mistakes time and again, Jain said while speaking at the annual industry conference Fibac.
“Despite the benefits offered for good compliance culture and the cost of poor conduct, the compliance culture at banks is far from satisfactory,” Jain, the commercial- banker-turned-central-banker said.
“During the process of supervisions, the apex bank has observed various lacunae in the compliance culture. Some weaknesses and irregularities observed have been recurring in spite of the commitments to the Reserve Bank,” he added.
The deputy governor said “It won’t be an exaggeration to say that some big losses suffered by banks on account of frauds could have been avoided if they had good compliance culture.”
He further added that between January and July, RBI has marked out 70 instances where banks have been cumulatively fined Rs 122.9 crore, with a majority of it being levied for lack of compliance. Jain said compliance should be a shared responsibility and not just limited to the top management. Banks have board-adopted policies on corporate governance, but the same should not be looked as a compliance function alone, he said, asking for the effective implementation of the same.