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J&K Bank issues clarification on penalty imposed by RBI

We have strengthened Compliance framework by creating a separate compliance vertical: Chairman


KNS

Srinagar, Nov 15 (KNS): J&K Bank today issued a clarification after the Reserve Bank of India (RBI) imposed monetary penalty on it. Notably, RBI yesterday issued two separate press releases stating that it had imposed monetary penalties on J&K Bank and Deutsche Bank on account of non-compliance of asset classification norms and KYC/AML guidelines. The JK Bank spokesperson when contacted clarified that the penalty imposed has been on account of deficiencies pertaining to the past periods which stand fully rectified now.
Elaborating further the Bank’s President Corporate Communication stated that the Reserve Bank of India had pointed out divergence in classification in respect of some of the restructured accounts under Rehabilitation package which included large borrower accounts of J&K state that were affected by the 2014 floods and 2016 disturbances in the Valley, besides some deficiencies in the KYC compliance mechanism of the Bank. In respect of the IRAC guidelines, the President added that the Bank had restructured accounts with the aim and objective of providing relief and handholding to the business community who suffered due to prolonged disturbance in the valley. The Reserve Bank of India however declined the rationale and representations of the Bank for a special dispensation for such borrowers; accordingly all such accounts were downgraded by the Bank with retrospective effect as per the directions of RBI. Taking cognizance of non-compliance of IRAC norms by the Bank in identifying and downgrading such affected accounts, RBI has imposed the penalty which is a practice followed by the Reserve Bank in all such cases. The spokesperson of the Bank also asserted that the compliance framework of the Bank has also been strengthened further to obviate such instances in future.
The Chairman & CEO JK Bank Parvez Ahmed when reached for comments on the issue said, “We have great regard for the guidance and mentorship of Reserve Bank of India, however, in the instant case, our intent was to support all these accounts which were good quality credit borrowers and their restructuring was not prompted due to intrinsic weaknesses in these accounts but due to certain extraordinary circumstances viz floods in 2014 and unrest in 2016. After our requests for a special dispensation for such large borrower accounts were not acceded to by the regulator, we complied to the divergence pointed out and made the necessary provisions accordingly. But let me compliment the business community who came forward and cleared all their dues besides acknowledging the handholding approach of the JK Bank in times of distress. In respect of the deficiencies pertaining to the KYC Compliance for the past periods, immediately after taking over as the Chairman & CEO we have strengthened the Compliance framework by creating a separate compliance vertical headed by an Executive President/Chief Compliance Officer to obviate any such recurrence in future.” (KNS)