RBI Slaps Rs84 Lakh Penalty on 5 Cooperative Banks, including NKGSB Cooperative Bank

Moneylife Digital Team 19 January 2024

Investor Interest

Reserve Bank of India (RBI) has imposed a penalty of Rs84 lakh on five cooperative banks, including NKGSB Cooperative Bank Ltd and New India Cooperative Bank Ltd from Mumbai, for non-compliance with the directions issued by the banking regulator.

The highest penalty of Rs50 lakh has been imposed on NKGSB Cooperative Bank. Other banks fined by RBI are New India Cooperative Bank from Mumbai and Patdi Nagarik Sahakari Bank Ltd, Idar Nagarik Sahakari Bank Ltd and Mehsana Nagrik Sahakari Bank Ltd from Gujarat.

NKGSB Cooperative Bank was penalised for being non-compliant with the RBI directions on know your customer (KYC) norms.

"The statutory inspection of the bank conducted by RBI with reference to its financial position as of 31 March 2021 and examination of the inspection report (IR), risk assessment report (RAR) and all correspondence revealed that the bank had opened and allowed transactions in current accounts of a company without undertaking customer due diligence procedure," RBI says.

New India Cooperative Bank was penalised Rs15 lakh for non-compliance with the directions issued by RBI on donations or contributions for public or charitable purposes out of profits of urban cooperative banks (UCBs). The Bank had breached the prescribed ceiling on donations during FY20-21, RBI says.

Gujarat-based Patdi Nagarik Sahakari Bank was slapped with a fine of Rs10 lakh as the Bank had made donations to a trust in which a relative of one of the directors of the Bank was interested. The Bank sanctioned loans to relatives of one of its directors and also approved loans wherein relatives of its directors stood as guarantors.

Further, RBI says Patdi Nagarik Sahakari Bank breached the prudential inter-bank gross exposure limit and counterparty exposure limit and accepted interest-free deposits other than the current account deposits.

Statutory inspection for the year ending 31 March 2022 and examination of the IR, RAR and all related correspondence revealed that Mehsana Nagrik Sahakari Bank from Gujarat sanctioned loans, wherein a relative of one of the Bank's directors stood as guarantor and did not pay interest on overdue matured term deposits from the date of maturity till the date of their repayment at the applicable rate. The Bank also did not transfer the eligible amount to the depositor education and awareness fund (DEAF). RBI imposed a penalty of Rs7 lakh on Mehsana Nagrik Sahakari Bank.

Idar Nagarik Sahakari Bank was penalised Rs2 lakh for non-compliance with the directions issued by RBI on placement of deposits with other banks by primary UCBs. The Bank had breached the prudential inter-bank counterparty exposure limit, RBI says.

Further, 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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