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The banks penalised are ICICI Bank (Rs 5 lakh), Citibank (Rs 5 lakh), Standard Chartered Bank (Rs 5 lakh), HDFC Bank (Rs 5 lakh), Vijaya Bank (Rs 10 lakh), Bharat Overseas Bank (Rs 20 lakh) and Indian Overseas Bank (Rs 15 lakh).
The RBI has also prohibited banks from crediting account-payee cheques to the account of any person other than the payee named in the cheque.
This follows the coming to light of a modus operandi wherein the proceeds of individual account-payee refund orders were credited into the accounts of brokers instead of the individual accounts on the request of the associates of the depository participants.
The RBI has accused the seven banks of violating its regulations on customer identification in opening of savings, current and demat accounts, breaching prudent banking practices and facilitating the misuse of IPO finance to ineligible borrowers.
The fine was imposed in the exercise of powers vested in the RBI under the provisions of Section 47 A (1) (b) of the Banking Regulation Act, 1949.
These banks will have to publish the penalties imposed by the central bank in their 2005-06 annual report. They will also be required to make this public when they enter the capital market in future.
"Even though the penalty is small, the banks involved run a huge reputation risk," said a senior banker.
The decision to impose penalties was taken after giving the defaulting banks an opportunity to make oral submissions on January 20 and 21.
