RBI Imposes Rs6.25 Lakh Penalty on 5 Cooperative Banks

Moneylife Digital Team 14 February 2025

Investor Interest

Reserve Bank of India (RBI) has imposed a penalty of Rs6.25 lakh on five cooperative banks for non-compliance with the directions issued by the banking regulator. The highest penalty of Rs2 lakh has been imposed on Gujarat-based Sulaimani Cooperative Bank Ltd.

Other banks penalised by RBI are Salem Urban Cooperative Bank Ltd, Tiruppur Cooperative Urban Bank Ltd and Ramanathapuram Cooperative Urban Bank Ltd from Tamil Nadu and Mumbai Mahanagarpalika Shikshan Vibhag Sahakari Bank Ltd.

Sulaimani Cooperative Bank has been penalised for non-compliance with directions issued by RBI on placement of deposits with other banks by primary urban cooperative banks (UCBs) and interest rates on deposits.

RBI statutory inspection revealed that Sulaimani Cooperative Bank failed to follow the required prudential inter-bank gross exposure limit. The lender also offered fixed deposits with a minimum tenor that did not comply with the prescribed tenor and opened savings deposit accounts for ineligible entities.

Salem Urban Cooperative Bank has been fined Rs1.75 lakh for not complying with RBI directions. These violations include rules on loans and advances to directors, their relatives, firms or concerns in which they have an interest, exposure norms, statutory restrictions for UCBs and know-your-customer (KYC) requirements. The lender had sanctioned director-related loans, approved unsecured advances beyond the prescribed regulatory limit, and failed to upload customer KYC records to the Central KYC Records Registry (CKYCR) within the required timeline.

The statutory inspection of Tiruppur Cooperative Urban Bank revealed that the lender failed to adhere to the prudential inter-bank (gross) exposure limit and did not upload customer KYC records onto the CKYCR within the prescribed timeline.

As a result, RBI imposed a penalty of Rs1.50 lakh on Tiruppur Cooperative Urban Bank.

Mumbai Mahanagarpalika Shikshan Vibhag Sahakari Bank and Ramanathapuram Cooperative Urban Bank have been fined Rs50,000 each for non-compliance with directions issued by RBI on KYC.

Mumbai Mahanagarpalika Shikshan Vibhag Sahakari Bank failed to carry out periodic reviews of risk categorisation of accounts at least once in six months, while Ramanathapuram Cooperative Urban Bank failed to upload the KYC records of customers to CKYCR within the prescribed timeline.

RBI says its action against these five cooperative banks is based on deficiencies in regulatory compliance and is not intended to pronounce on the validity of any transaction or agreement entered into by the banks with their customers.

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