ICICI Bank fined $9 million for breach of bonds sale rule

The Reserve Bank of India (RBI) has fined ICICI Bank Ltd, the country’s third biggest lender, 589 million rupees ($ 9.04 million) for not sticking to certain rules about sale of government securities, in a rare move by the banking regulator.

The RBI imposed the penalty on ICICI Bank for not complying with directions issued by it on direct sale of securities held under the bank’s held-to-maturity (HTM) portfolio and for lack of disclosure about the sale, the central bank said in a statement here on Thursday.

Bonds acquired by banks with an intention to hold until they mature are classified under the HTM category, and the amount of such securities need to be disclosed by the lenders.

These debt instruments are also not allowed to be traded on a day-to-day basis.

However, the RBI permits banks to sell securities from their HTM portfolios, but under certain limits and disclosure rules.

If the value of such sales exceeds 5 percent of the HTM investments, then banks are required to disclose it in their annual reports.

ICICI Bank said it continued to sell bonds from its HTM category for a few weeks during the quarter ended March 2017 due to “genuine misunderstanding” on the timing of the applicability of RBI’s direction in the matter.

The lender said it disclosed in its fiscal year 2017 annual report that it had sold over 5 percent of investments under the HTM category. However, it had not made the specified additional disclosure at the time, the bank said in a statement on Thursday here.