The Reserve Bank of India (RBI) on Friday penalized the Indian arm of JP Morgan Chase Bank the largest U.S. bank for flouting regulatory guidelines in risk management and inter-bank dealings. The Indian central bank slapped a fine of Rs 5 lakh.
"The Reserve Bank of India has imposed a penalty of Rs 5 lakh on JP Morgan Chase, N.A., Mumbai (the bank), in exercise of the powers vested with it under the provisions of Section 47A(1)(b) read with Section 46(4)(i) of the Banking Regulation Act, 1949," said a release issued by the RBI.
RBI observed that some contravention of various regulatory directions and instructions in respect of risk management and inter bank dealings and compliance functions took place during the year 2011-2012. Afterwards, it had issued "show cause notice" to the bank. JP Morgan later also submitted written reply in response to it.
On a careful examination of the bank's written reply and the documents available on record, the Reserve Bank found that the violations were conclusively established and a penalty was thus imposed, the central bank said.
Earlier in December, 2011; the bank was similarly imposed fine of Rs 5 lakh for violating foreign exchange derivative transaction norms. At that time, there were other 18 banks (including some large public and private sector lenders) in the league.
"The imposed fine amount is not significant. Perhaps, it is pittance for them. However, the reputational risk arising out of those RBI measures is something that may hurt the bank," a senior official from a big consulting firm told moneycontrol.com on condition of anonymity.
The international bank on Friday declared its first quarter (in CY13) earnings. JPMorgan Chase & Co reported higher profit on the back of lower expenditure on litigation. However, most of its major businesses failed to generate encouraging performances. The bank's overall revenue fell.
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saikat.das@network18online.com
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