RBI Slaps Rs1.13 Crore Penalty on 4 Cooperative Banks including Bombay Mercantile Cooperative Bank
Moneylife Digital Team 09 February 2024
Reserve Bank of India (RBI) has imposed a penalty of Rs1.13 crore on four cooperative banks, including Bombay Mercantile Cooperative Bank Ltd, for non-compliance with the directions issued by the banking regulator. The highest penalty of Rs63.30 lakh has been imposed on Bombay Mercantile Cooperative Bank.
 
Other banks fined by RBI are Zoroastrian Cooperative Bank Ltd from Mumbai, Navnirman Cooperative Bank Ltd from Gujarat and Nakodar Hindu Urban Cooperative Bank Ltd from Punjab.
 
Bombay Mercantile Cooperative Bank was penalised for non-compliance with the directions on exposure norms and statutory or other restrictions –urban cooperative banks (UCBs), gold loan – bullet repayment - UCBs and unclaimed deposits and inoperative or dormant accounts in UCBs.
 
"The statutory inspections of the Bank with reference to its financial position as of 31 March 2021 and 31 March 2022 and examination of the risk assessment reports (RAR), inspection reports (IR) and all correspondence related revealed that Bombay Mercantile Cooperative Bank had sanctioned and disbursed loans to nominal members exceeding the regulatory ceiling of Rs1 lakh. It also sanctioned and disbursed gold loans with bullet repayment option, exceeding the regulatory ceiling of Rs2 lakh and recovered charges for activation of inoperative accounts, claiming it to be reimbursement of expenses for such activation", RBI says.
 
Mumbai-based Zoroastrian Cooperative Bank was fined Rs43.30 lakh for non-compliance with the directions issued by RBI on maintenance of deposit accounts, interest rate on deposits and frauds in UCBs, changes in monitoring and reporting mechanisms. 
 
Zoroastrian Cooperative Bank had recovered penal charges from savings accounts for non-maintenance of minimum balances therein without notifying the depositors. It also did not pay interest on balances lying in the current accounts of deceased individual depositors or proprietorship concerns from the date of their death till the date of repayment of such balances to their claimants. The bank also reported fraud with delay.
 
Statutory inspection of Nakodar Hindu Urban Cooperative Bank regarding its financial position as of 31 March 2022 and examination of the IR, RAR and all correspondence related revealed that the Bank failed to adhere to income recognition and asset classification (IRAC) norms and paid dividends. The Bank had sanctioned or renewed loans exceeding 50% of the applicable regulatory limit for single borrower exposure, incurred capital expenditure exceeding the prescribed limit and incurred operating expenditure by granting gifts in violation of specific directions issued under SAF.
 
RBI, therefore, imposed a penalty of Rs6 lakh on Nakodar Hindu Urban Cooperative Bank.
 
Navnirman Cooperative Bank was penalised Rs1 lakh for non-compliance with the directions issued by RBI on loans and advances to directors, relatives and firms or concerns in which they are interested read with loans and advances to directors - directors as surety or guarantors. It sanctioned loans where a relative of the bank's director stood as a guarantor.
 
RBI says its action against these four 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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