RBI Imposes Rs7.25 Lakh Penalty on 5 Cooperative Banks

Moneylife Digital Team 30 January 2024

Investor Interest

Reserve Bank of India (RBI) has imposed a penalty of Rs7.25 lakh on five cooperative banks, for non-compliance with the directions issued by the banking regulator. The highest penalty of Rs5 lakh has been imposed on Dr Panjabrao Deshmukh Urban Cooperative Bank Ltd from Maharashtra.

Other banks penalised by RBI are Jila Sahakari Kendriya Bank Maryadit from Madhya Pradesh, Bhilai Nagrik Sahakari Bank Maryadit from Chhattisgarh while Krushiseva Urban Cooperative Bank Ltd and Mula Sahakari Bank Ltd are from Maharashtra.

Dr Panjabrao Deshmukh Urban Cooperative Bank was penalised for contravention of specific directions issued by RBI under supervisory action framework (SAF) and non-compliance with the directions on management of advances- urban cooperative banks (UCBs) and know your customer (KYC).

"The statutory inspection of Dr Panjabrao Deshmukh Urban Cooperative Bank conducted by RBI with reference to its financial position as on 31 March 2022, and examination of the risk assessment report (RAR) and all correspondence related revealed, that the Bank had sanctioned fresh loans and advances carrying risk weight of more than 100% in violation of specific directions issued under SAF and sanctioned gold loans under the bullet repayment scheme beyond the regulatory limit. Dr Panjabrao Deshmukh Urban Cooperative Bank further had not conducted periodic updation of KYC as per risk categorisation of customers, not conducted periodic review of risk categorisation of accounts and not put in place a robust software to throw alerts as part of effective identification and reporting of suspicious transactions," RBI says.

Jila Sahakari Kendriya Bank Maryadit has been penalised Rs75,000 for contravention of the provisions of section 26A and section 56 of the Banking Regulation Act (BR Act) and the depositor education and awareness fund (DEAF) scheme. The Bank had not transferred the eligible amount to the DEA Fund.

Statutory inspection for the year ending 31 March 2022 and examination of the RAR and all related correspondence revealed that Krushiseva Urban Cooperative Bank sanctioned loans to directors and their relatives and incurred capital expenditure without prior approval from RBI, which is a violation of directions issued under SAF. RBI, therefore, imposed a penalty of Rs50,000 on Krushiseva Urban Cooperative Bank.

Further, Bhilai Nagrik Sahakari Bank from Chhattisgarh was penalised Rs50,000 for failing to carry out periodic updation of KYC for its customers at the prescribed regular intervals.

Mula Sahakari Bank from Maharashtra was penalised with a fine of Rs50,000 for non-compliance with the directions issued by RBI on exposure norms and statutory and other restrictions - UCBs. The Bank also breached the inter-bank counterparty exposure limit, RBI says.

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

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