RBI imposes Rs59 crore fine on ICICI Bank

Mumbai: The Reserve Bank of India (RBI) has imposed a penalty of Rs58.9 crore on ICICI Bank Ltd, the country’s largest private sector lender, for failing to adhere to its directives regarding the sale of securities from the held-to-maturity, or HTM, portfolio.

“The Reserve Bank of India has imposed through an order dated March 26, 2018, a monetary penalty of Rs589 million (or Rs58.9 crore) on ICICI Bank Ltd (the bank) for non-compliance with directions issued by RBI on direct sale of securities from its held-to-maturity portfolio and specified disclosure in this regard,” the central bank said in a statement released on Thursday.

“This action is based on the 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,” the central bank’s statement added.

Banks hold debt securities in three categories, including held-to-maturity, available-for-sale (AFS) and held-for-trading (HFT).

Securities acquired with the intention of being held till maturity are classified under HTM.

If the value of sales of securities from HTM category exceeds 5% of the HTM investments, banks are required to disclose in the audited annual financial statements the market value of the HTM investments and indicate the excess of book value over market value.

“RBI has imposed a penalty on the bank for continued sale of government securities classified as HTM. ICICI Bank had continued with the sales from HTM category for a few weeks during the quarter ended March 31, 2017, due to a genuine misunderstanding on the timing of the applicability of RBI’s direction in this matter,” ICICI Bank clarified.

Under the existing RBI regulations, banks may shift investments to/from HTM with the approval of the board of directors once a year, and such shifting will normally be allowed at the beginning of the accounting year.