RBI Imposes Rs10,000 to Rs50 Lakh Penalties on 11 Cooperative Banks
Moneylife Digital Team 27 September 2022
The Reserve Bank of India (RBI) has imposed monetary penalties on 11 cooperative banks, including four from Gujarat, three from West Bengal and one each from Maharashtra, Andaman & Nicobar, Odisha and Haryana. All these lenders were found violating RBI's guidelines, including on loans and advances where relatives of directors had given surety or were guarantors for the debt. The penalties imposed on these cooperative banks range from Rs10,000 to Rs50 lakh. The Jalgaon People's Co-operative Bank Ltd was levied the highest penalty of Rs50 lakh for failing to adhere to RBI guidelines on income recognition, asset classification, provisioning and other related matters (IRAC norms), maintenance of deposit accounts and interest rate on deposits. 
 
1. Talod Nagrik Sahkari Bank Ltd, Sabarkantha (Gujarat)
 
RBI imposed a monetary penalty of Rs25,000 on The Talod Nagarik Sahakari Bank Ltd, Sabarkantha (Gujarat) (the bank) for contravention of directions issued by RBI on 'loans and advances to directors etc- directors as surety or guarantors- clarification'. 
 
The inspection of the bank, based on its financial position as of 31 March 2021, revealed that the bank had sanctioned credit facility to individuals where relatives of the bank's directors stood as guarantor, resulting in contravention of aforesaid directions issued by RBI. Based on this, a notice was issued to the bank advising it to show cause why penalty should not be imposed for non-compliance with the directions issued by RBI.
 
After considering the bank's reply to the notice and oral submissions made during the personal hearing, RBI came to the conclusion that the aforesaid charge of non-compliance with RBI directions was substantiated and warranted imposition of monetary penalty.
 
2. The Varachha Co-operative Bank Ltd, Surat (Gujarat)
 
RBI imposed a monetary penalty of Rs1 lakh on The Varachha Co-operative Bank Ltd at Surat in Gujarat for contravention of directions issued by RBI on ‘loans and advances to directors etc- directors as surety or guarantors- clarification-urban cooperative banks (UCBs)’. 
 
The statutory inspection of the bank, conducted by RBI with reference to the bank's financial position as of 31 March 2021, and examination of the risk assessment report and all related correspondence pertaining to the same revealed, inter alia, that the bank had sanctioned two credit facilities to individuals wherein a relative of one of its directors stood as the surety or guarantor, resulting in contravention of aforesaid directions issued by RBI.
 
3. Shree Parswanath Co-operative Bank Ltd, Rajkot (Gujarat)
 
RBI imposed a monetary penalty of Rs25,000 on Rajkot-based Shree Parswanath Co-operative Bank Ltd for contravention of directions issued by RBI on ‘loans and advances to directors etc- directors as surety or guarantors- clarification-urban cooperative banks (UCBs)’. 
 
RBI's statutory inspection, as of 31 March 2021, and examination of the risk assessment report and all related correspondence revealed that the bank had sanctioned one credit facility to an individual where two relatives of one of its directors stood as the surety or guarantor, resulting in contravention of aforesaid directions issued by RBI.
 
4. Shree Botad Mercantile Co-operative Bank Ltd, Botad (Gujarat)
 
RBI imposed a monetary penalty of Rs25,000 on Shree Botad Mercantile Co-operative Bank Ltd from Botad in Gujarat for contravention of its directions on 'loans and advances to directors etc- directors as surety or guarantors- clarification'.
 
The inspection of the bank, based on its financial position as of 31 March 2021, revealed that the bank had sanctioned credit facility to individuals where relatives of the bank's directors stood as guarantor, resulting in contravention of aforesaid directions issued by RBI. 
 
5. Balitikuri Cooperative Bank Ltd, Balitikuri, West Bengal
 
RBI imposed a monetary penalty of Rs1 lakh on the West Bengal-based Balitikuri Cooperative Bank Ltd for contravention of or non-compliance with its directions issued on know-your-customer (KYC). 
 
The inspection report of the bank, based on its financial position as of 31 March 2020, revealed that the bank had not undertaken periodic review of risk categorisation of its customers, in contravention of or non-compliance with the aforesaid directions issued by RBI. 
 
6. The Jalgaon People's Co-operative Bank Ltd, Jalgaon (Maharashtra)
 
RBI imposed a monetary penalty of Rs50 lakh on The Jalgaon People's Co-operative Bank Ltd for non-compliance with its directions on income recognition, asset classification, provisioning and other related matters (IRAC norms), maintenance of deposit accounts and interest rate on deposits. 
 
RBI's statutory inspection, as of 31 March 2021, and examination of the risk assessment report, inspection report and all related correspondence, revealed that the bank did not classify certain accounts as non-performing assets in accordance with the IRAC norms. The bank levied penal charges for non-maintenance of minimum balances in savings bank (SB) accounts without notifying the customers and without providing one month time for restoration of minimum balances in the accounts. Jalgaon People's Co-operative Bank did not pay interest on balance amounts lying in current accounts of deceased individual depositors or sole proprietorship concerns while making payments to the claimants, RBI says.
 
7. The Andaman & Nicobar State Co-operative Bank Ltd
 
RBI imposed a monetary penalty of Rs5 lakh on the Andaman & Nicobar State Co-operative Bank Ltd for contravention of and non-compliance with the provisions of Section 20 read with Section 56 of BR Act, 1949 (AACS).
 
The inspection report of the bank, based on its financial position as of 31 March 2019, revealed violation and non-compliance with the provisions of Section 20 read with Section 56 of the BR Act, 1949 (AACS) as the bank sanctioned unsecured loans to its directors. 
 
8. Bhatpara-Naihati Cooperative Bank Ltd., North 24 Parganas, West Bengal
 
RBI imposed a monetary penalty of Rs4 lakh on North 24 Parganas-based Bhatpara-Naihati Cooperative Bank Ltd for contravention of and non-adherence with the directions issued by RBI to UCBs on exposure norms and statutory or other restrictions—UCBs and management of advances—UCBs. 
 
The inspection reports of the bank, based on its financial positions as of 31 March 2019 and 31 March 2020, revealed that the bank had not complied with RBI directions on prudential inter-bank exposure both at the gross and counter party level and sanction of gold loans. 
 
9. Budge Budge Nangi Cooperative Bank Ltd, Budge Budge, West Bengal
 
The Central bank imposed a monetary penalty of Rs10,000 on Budge Budge Nangi Cooperative Bank Ltd for contravention of and non-compliance with its directions to UCBs on exposure norms and statutory/ other restrictions—UCBs. 
 
The inspection reports of the bank, based on its financial position as of 31 March 2020 and 31 March 2021, revealed that the bank had not complied with the directions on prudential inter-bank exposure limit, both at the gross as well as counter party level, RBI says.
 
10. The Urban Co-operative Bank Ltd., Cuttack, Odisha
 
RBI imposed a monetary penalty of Rs10,000 on The Urban Co-operative Bank Ltd for contravention of and non-compliance with its directions on the Depositor Education and Awareness Fund (DEAF).
 
A scrutiny of the records of the bank revealed, inter alia, violation/ non-compliance with aforementioned directions issued by RBI to the extent the bank had failed to transfer all eligible balances to the DEA Fund but had submitted an incorrect certificate in this regard. 
 
11. Hissar Urban Cooperative Bank Ltd, Hisar 
 
RBI imposed a monetary penalty of Rs3 lakh on the Hissar Urban Cooperative Bank Ltd for contravention of Section 35A and section 36 (1) read with Section 56 of the Banking Regulation Act, 1949.
 
The inspection report of the bank, based on its financial position as of 31 March 2021, revealed, inter alia, contravention of Section 35A and section 36 (1) read with Section 56 of the BR Act, 1949. The bank had failed to adhere to RBI directions issued under the supervisory action framework when it offered interest rates on saving deposits not in line with the directions.
Comments
Free Helpline
Legal Credit
Feedback