RBI fines ICICI Bank, HDFC Bank, Axis Bank and 9 other banks for Deccan Chronicle default

The Reserve Bank of India has fined 12 banks a total of Rs1.5 crore for not following guidelines in advancing loans to the Deccan Chronicle publishing group, which has defaulted to the extent of Rs4,000 crore.

The banks that have been penalised include the three major private sector banks - ICICI Bank, HDFC Bank and AXIS Bank. 

The RBI had carried out a scrutiny of the loan and current accounts of Deccan Chronicle Holdings Ltd in certain branches of these banks in late 2013. Based on the findings of the scrutiny, the central bank issued show cause notices to these banks in March 2014, to which the individual banks submitted written replies.

"After considering the facts of each case and the individual bank's reply, as also, the personal submissions etc, by some of the banks before its committee of executive directors, the Reserve Bank came to the conclusion that some of the violations were substantiated and warranted imposition of monetary penalty," said RBI in a statement.

RBI had since issued show-cause notices to these banks in March 2014, to which the individual banks submitted written replies. After considering the facts of each case and the individual bank's reply, as also, the personal submissions etc, by some of the banks before its committee of executive directors, the central bank came to the conclusion that some of the violations were substantiated and warranted imposition of monetary penalty.

The maximum penalty of Rs40 lakh was imposed on ICICI Bank, followed by Axis Bank and IDBI Bank (Rs15 lakh each), Andhra Bank, Canara Bank, Canara Bank, Corporation Bank, IndusInd Bank, Kotak Mahindra Bank, State Bank of Hyderabad and Yes Bank (Rs10 lakh each) and HDFC Bank and Ratnakar Bank (Rs5 1akh each).

Hyderabad-based Deccan Chronicle borrowed Rs4,000 crore from a consortium of 18 lenders and defaulted on repayments.

The company is said to have misused the banking system by borrowing from one set of lenders without keeping others informed. With due diligence on its credit history banks could have prevented the buildup of such a huge NPA in this case, say a banking source.

''Based on the findings of the scrutiny, the RBI issued show cause notices to these banks in March 2014, to which the individual banks submitted written replies. After considering the facts of each case and the individual bank's reply, as also, the personal submissions etc, by some of the banks before its Committee of Executive Directors, the RBI came to the conclusion that some of the violations were substantiated and warranted imposition of monetary penalty,'' the RBI said.

''This action is not intended to pronounce upon the validity of any transaction or agreement entered into between the concerned bank and the borrower,'' the RBI clarified.

Bankers only discovered quite late that the value of assets pledged was insufficient to cover the loan recovery.

It was also found that the collateral was less than half of the loan amount of Rs4,000 crore and that too was pledged and repledged with other lenders' assets.