Reserve Bank of India (RBI) has imposed a penalty of Rs13.70 lakh on five cooperative banks, including four from Gujarat and one from Maharashtra, for non-compliance with the directions issued by the banking regulator. The highest penalty of Rs5 lakh has been imposed on Gujarat-based Sarvodaya Commercial Cooperative Bank Ltd.
Other banks penalised by RBI are: Maharashtra Gramin Bank, Gujarat-based Shree Bharat Cooperative Bank Ltd, Sardargunj Mercantile Cooperative Bank Ltd and Uma Cooperative Bank Ltd.
Sarvodaya Commercial Cooperative Bank has been penalised for failing to comply with several regulatory directions. The violations relate to donations or contributions made for public or charitable purposes out of the profits of urban cooperative banks (UCBs), the presentation and disclosures in financial statements, inspection and audit systems in primary UCBs, as well as income recognition, asset classification, provisioning and other related matters concerning UCBs. The lender was also found to have lapses in adhering to know-your-customer (KYC) guidelines.
RBI’s statutory inspection revealed several irregularities at Sarvodaya Commercial Cooperative Bank. It was found that the lender had made donations beyond the prescribed regulatory ceiling to trusts and failed to present a true and fair picture of its profits and assets in its profit and loss statement and balance sheet.
The inspection also noted that Sarvodaya Commercial Cooperative Bank was conducting concurrent audits on a monthly basis instead of carrying out simultaneous checks of transactions, with reports often submitted after delays. Further, the lender failed to classify certain non-performing assets (NPAs) under the appropriate sub-categories and did not carry out a periodic review of risk categorisation of accounts which is required at least once every six months.
Maharashtra Gramin Bank has been fined Rs4.20 lakh for non-compliance with directions issued by the National Bank for Agriculture and Rural Development (NABARD) and RBI. The inspection revealed that the lender reported certain fraud to NABARD with delays and failed to adhere to NABARD’s guidelines on the submission of off-site surveillance system (OSS) and financial monitoring system (FMS) returns under the off-site surveillance system. It was also found non-compliant with RBI’s KYC norms, as it had not put in place a system for the periodic review of risk categorisation of accounts which is required at least once every six months.
Vadodara, Gujarat-based Shree Bharat Cooperative Bank has been penalised Rs2.50 lakh for non-compliance with several directions relating to inspection and audit systems in primary UCBs, income recognition, asset classification, provisioning and KYC norms. RBI inspection found that the lender had failed to establish a proper system of internal audit and did not have a mechanism to identify NPAs on an ongoing basis. It also failed to classify certain loans and advances as NPAs. In addition, the lender had not conducted a periodic review of the risk categorisation of accounts which is required at least once every six months.
Uma Cooperative Bank has been penalised Rs1 lakh for non-compliance with certain directions issued by RBI on inspection and audit systems in primary UCBs.The lender had failed to conduct an internal audit during 1 April 2022 to 31 March 2024.
Sardargunj Mercantile Cooperative Bank was also fined Rs1 lakh for non-compliance with directions issued by RBI on cooperative banks - interest rate on deposits. The lender had accepted certain interest-free deposits in accounts other than current account.
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.
