Keywords: private sector bank, Monetary , Penalty, FEMA, Financial System
In a significant move, the Reserve Bank of India (RBI) has fined HDFC Bank and Bank of America Rs 10,000 each for non-compliance with reporting requirements under the Liberalised Remittance Scheme of the Foreign Exchange Management Act (FEMA).
The action comes as a result of HDFC Bank, a prominent private sector bank, allegedly accepting deposits from non-residents in violation of RBI directives related to the Liberalised Remittance Scheme of FEMA, 1999. The bank acknowledged the lapse in an exchange filing, stating that it failed to obtain RBI’s approval for maintaining current and fixed deposit accounts of a foreign bank after the cancellation of their license, contravening para 13 of AP (DIR Series) Circular no. 67 dated May 5, 2016.
Bank of America also faced a similar penalty for violating FEMA regulations. In an official circular, the RBI stated, “The Reserve Bank of India has imposed a monetary penalty of Rs 10,000 (Rupees ten thousand only) on Bank of America, N.A. in exercise of powers vested in the Reserve Bank under the provisions of Section 11(3) of FEMA, 1999, for violation of the Reserve Bank of India’s instructions on reporting requirements under the Liberalised Remittance Scheme of FEMA 1999.”
The central bank had issued Show Cause notices to both HDFC Bank and Bank of America, and after reviewing their responses, it decided to impose the penalties. RBI clarified that the penalties were based on regulatory deficiencies and do not affect the validity of transactions undertaken by the banks with their customers.
The Liberalised Remittance Scheme of FEMA allows Indian residents to remit money abroad for various purposes, including travel, education, and investments, within the specified limits set by the RBI. The reporting requirements are in place to ensure transparency and compliance with the regulations governing such transactions.
Both banks have been instructed to pay the penalties promptly. The RBI’s action underscores the regulatory authority’s commitment to maintaining the integrity of the financial system and ensuring that banks adhere to the prescribed guidelines.
Business-standard.com , https://www.business-standard.com/finance/news/rbi-imposes-penalty-on-hdfc-bank-bank-of-america-for-violating-fema-norms-123113000977_1.html
Legal.economicstimes.indiatimes.com, https://legal.economictimes.indiatimes.com/news/regulators/rbi-fines-hdfc-bank-and-bank-of-america/105635094
Written by : shalmali ugare, College : DES NFLC , Pune, Sem: 3rd intern under legal vidhiya
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