Investment of Banks in Money Laundering

The contravention of any of the directions and instructions issued by Reserve Bank of India (RBI) under the Banking Regulation Act, 1949 is an offence punishable under sub-section (4) of Section 46 of the Banking Regulation Act. In terms of sub-section (1) of Section 47A of the Banking Regulation Act, 1949, if a contravention or default of the nature referred to in sub-section (4) of Section 46 is made by a bank, the Reserve Bank may, inter-alia, impose on such bank, a penalty not exceeding one crore rupees for each of such contravention and a further penalty which may extend to one lakh rupees for every day during which the contravention or default continues.

The monetary penalties have been imposed on banks in exercise of powers vested in the RBI under the provisions of Section 47(A)(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949.

The fines and monetary penalties under section 46 and 47A of the Banking Regulation Act, 1949 respectively were substantially increased through the Banking Laws (Amendment Act, 2012 which was brought into force in January, 2013. The objective of the amendments was to establish an effective and dissuasive penalty regime for violations of the provisions of the Banking Regulation Act, 1949.

In view of the recent amendment to strengthen the regulatory and supervisory powers of RBI by rationalising the fine and penalty regime for violations under the Banking Regulation Act, 1949, there is no proposal to further rationalise the fine and penalty regime under the Banking Regulation Act, 1949.

This was stated by Minister of State for Finance, Shri Namo Narain Meena in written reply to a question in Rajya Sabha today.