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Reference is invited to the Press Release No. 2018-2019/2144 dated March 08, 2019 regarding imposition of penalty on 36 banks for non-compliance with various directions issued by the Reserve Bank of India (RBI) on time-bound implementation and strengthening of SWIFT-related operational controls. In continuation thereto, RBI has imposed, by an order dated February 25, 2019, a monetary penalty of â‚¹ 20 million (Rupees Twenty Million) on Punjab National Bank (the bank) for non-compliance with aforesaid directions issued by RBI (Press Release: 2018-2019/2300 dated March 27, 2019). This penalty has been imposed in 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, taking into account failure of the bank to adhere to the aforesaid directions issued by RBI and based on the extent of non-compliance in the bank.

This action is based on 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.

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Here is the text of Press Release No. 2018-2019/2144 dated March 08, 2019:

The Reserve Bank of India (RBI) has imposed, by orders dated January 31, 2019 and February 25, 2019, monetary penalty for non-compliance with various directions issued by RBI on time-bound implementation and strengthening of SWIFT-related operational controls on 36 banks as detailed below:

These penalties have been imposed in 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, taking into account failure of the above banks to adhere to the aforesaid directions issued by RBI. This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers.

Background:

An assessment of compliance with RBI directions on implementation and strengthening of SWIFT-related operational controls of 50 major banks was carried out which revealed that banks had not complied with one or more of the major directions pertaining to:

(i) direct creation of payment messages in the SWIFT environment,

(ii) implementation of Straight Through Processing (STP) between CBS/Accounting System and SWIFT system,

(iii) ensuring that users entering/ passing/authorizing the transactions in CBS were different from those operating in SWIFT environment,

(iv) independent reconciliation of logs generated from SWIFT with corresponding entry passed in the CBS/accounting system,

(v) introduction of an additional layer of approval for all payment messages exceeding a particular threshold, and

(vi) Nostro reconciliation on T+1/T+5 basis.

Based on the findings of the assessment and extent of non-compliance, Notices (SCNs) were issued to 49 banks advising them to show cause as to why penalty should not be imposed for non-compliance with directions issued by RBI as indicated therein. After considering the replies received from the banks, oral submissions made in the personal hearings, where sought by the banks, and examination of additional submissions, if any, RBI decided to impose monetary penalty on aforementioned 36 banks, based on the extent of non-compliance in each bank.

Note: Copy of Press Release: 2018-2019/2300 is enclosed.

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