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RBI Regulations

Master Circular on Scheme of Penalties for Bank Branches

Ashish M. Shaji
08 Aug, 2020 08 Aug, 2020
Penalties for bank branches

The Reserve Bank of India issued a master circular on the scheme of penalties for bank branches based on the performance in rendering the customer service to the members of the public. The master circular is addressed to the chairman and managing director, CEOs of all banks.

What is the objective of the issuance of a Master circular on the scheme of penalties for bank branches?

This Scheme of penalties for bank branches, including currency chests, has been formulated to ensure that all bank branches provide better customer service to the members of the public with respect to the exchange of notes and coin, in keeping with the objectives of clean note policy.

What kind of penalties can be enforced on banks?

The RBI has laid down the penalties to be imposed on banks for deficiencies in exchange of notes and coins/remittances sent to the RBI/operations of currency chests etc.

The table made below specifies the nature of irregularity and the respective penalties on its occurrence.

Sr. No.Nature of IrregularityPenalty
i.)Shortages in the soiled note remittances and currency chest balances
In case of notes in denomination up to 50 rupees- 50 rupees per piece in addition to the loss. In case of notes in denomination of 100 rupees and above- Equal to the value of denomination per piece in addition to the loss. In a case of shortage in soiled note, remittances/chest balances the amount of shortage or loss thereof shall be immediately recovered. Penalty will be immediately levied on the detection of shortage in soiled note remittances/chest balances, irrespective of the number of pieces detected.
ii.)Counterfeit notes detected in the soiled note remittances and in the currency chest balancesPenalty in case of detection of counterfeit notes by RBI from soiled note remittances of banks and in currency chest balances will be levied in terms of the instruction issued by DCM (FNVD) No.G-1 /16.01.05/2019-20 dated 1st July 2019.
iii.)Mutilated notes detected in the soiled note remittances and currency chest balances50 rupees per piece irrespective of the denomination

In case of mutilated notes detected in the soiled note remittances and currency chest balances, the amount of loss thereof will be immediately recovered.

Penalty shall be immediately levied on detection of mutilated notes in the soiled note remittances or currency chests balances, irrespective of the number of piece detected.
iv.)Non-compliance with the operational guidelines by currency chests detected by RBI officials such as:

a) Non-functioning of CCTV;

b) Branch cash/documents kept in strong room;

c) Non-utilization of NSMs (Note Sorting Machines) for sorting of notes (NSMs not used for sorting of the high denomination notes received over the counter or not used for sorting notes remitted to the chest/RBI).		Penalties for bank branches of 5000 rupees for each irregularity.

The penalty will be enhanced to 10,000 rupees in case of repetition.

The penalty will be levied immediately.
v.)Violation of any term of the agreement with the RBI (for opening and maintaining the currency chests) or deficiency in the service in providing exchange facilities, as detected by the RBI officials like:
  Non-issuance of coins over the counter to any member of the public despite having stock.
Refusal from any bank branch to exchange soiled notes/refusal by any currency chest branch to adjudicate the mutilated notes tendered by any member of the public.
Non-conduct of surprise verification of chest balance, at least at bi-monthly intervals, by officials unconnected with the custody thereof and by officials from the Controlling Office once in six months.
Denial of facilities or services to linked branches of other banks.
Non-acceptance of lower denomination notes (i.e., denomination of 50 rupees and below) tendered by members of public and linked bank branches.Detection of mutilated or counterfeit notes in re-issuable packets prepared by the currency chest branches.		10,000 rupees for any violation of agreement or deficiency of service.

 5 lakh rupees in case there are more than five instances of violation of agreement/deficiency in service by the branch.  The levy of such penalty shall be placed in the public domain.

Penalty will be levied immediately.

Who shall be the competent authority according to the operational guidelines by RBI on levy of penalties for bank branches?

As per the guidelines by RBI, the competent authority to decide the nature of irregularity shall be the officer in charge of the issue department of the regional office under whose jurisdiction the defaulting currency chest or bank branch is located.

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What is the provision regarding appeal as per the operational guidelines by RBI?

The RBI has given the provision of appealing against the decision of the competent authority. It states that an appeal can be moved by the Controlling Office of the currency or chest branch to the Regional Director or the Chief General Manager or the Officer in charge of the concerned regional office, within one month from the date of debit, who may decide whether the same may be accepted or rejected.

It may be noted that the RBI has been clear on the fact that the appeals for waiver of penalty on the following grounds will not be considered:

  • Staff being new or untrained;
  • Lack of awareness of staff; and
  • Corrective action having been taken or will be taken etc.

Conclusion


The issuance of the master circular, on the scheme of penalties for bank branches based on performance in rendering customer service to the members of the public, signifies the intent of the RBI to ensure banks provide the best service to its customers. It imposes the need for bank branches to ensure that they keep up with the requirements that help them to deliver their services well.

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