RBI Slaps Rs14 Lakh Penalty on 4 Cooperative Banks
Moneylife Digital Team 15 September 2023
Reserve Bank of India (RBI) has imposed monetary penalties on four cooperative banks citing the violation of different laws prescribed by the regulator. Three banks are from Gujarat, while the other belongs to Maharashtra. RBI has levied a fine of Rs5 lakh each on Waghodia Urban Cooperative Bank Ltd and Viramgam Mercantile Cooperative Bank Ltd, both from Gujarat. At the same time, Baramati Sahakari Bank Ltd from Maharashtra and Becharaji Nagarik Sahakari Bank Ltd from Gujarat have been penalised Rs2 lack each.
 
After considering the reply and oral submissions of all banks during the personal hearing, RBI says it concluded that the charges of non-compliance with its directions were substantiated and warranted imposition of monetary penalty on these four cooperative banks. 
 
RBI imposed a penalty of Rs5 lakh on Viramgam Mercantile Cooperative Bank for non-compliance with the directions issued on loans and advances to directors as surety or guarantors, for placement of deposits with other banks by primary urban cooperative banks (UCBs) and specific directions issued under the supervisory action framework (SAF). 
 
The statutory inspection revealed that the Bank had sanctioned loans wherein relatives of the Bank’s directors stood as surety or guarantor. The Bank also breached the prudential inter-bank counterparty exposure limit. It offered interest rates on deposits at rates more than those provided by the State Bank of India (SBI) in violation of specific directions issued under SAF. 
 
On the other hand, Waghodia Urban Cooperative Bank has been fined Rs5 Lakh for non-compliance with the directions issued by RBI on loans and advances to directors, relatives and firms concerns in which they are interested and loans and advances to director’s - in which directors stood as surety or guarantors- clarification- UCBs and RBI direction 2016.
 
The financial position as on 31 March 2022 and examination of the inspection report revealed that the Bank had sanctioned credit facilities to individuals where the relatives of its directors stood as guarantors, and the Bank breached the prudential inter-bank counterparty exposure limit. The Bank also had not paid interest on matured recurring deposits from the date of maturity till the date of repayment at the rate applicable to saving deposits or at the contracted rate of interest, whichever is lower . It has also not paid interest on term deposits for the Sundays, holidays or  non-business working days, on which the same had matured and which were repaid on the succeeding working days.
 
Further, Becharaji Nagarik Sahakari Bank from Gujarat has been penalised Rs2 lakh for non-compliance with the directions issued by RBI on placement of deposits with other banks by primary UCBs. The inception report of the Bank revealed that it had breached the prudential inter-bank counterparty exposure limit.
 
A similar Rs2 lakh fine was imposed on Baramati Sahakari Bank for non-compliance with the directions issued by RBI on maintenance of deposit accounts - primary UCBs. The risk assessment report and all related correspondence about the Bank revealed that it had not credited interest to inoperative savings bank accounts.
 
According to RBI, the penalty is based on deficiencies in regulatory compliance and is not intended to be pronounced upon the validity of any transaction or agreement entered by the company with its customers.
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