RBI Imposes Rs10.50 Lakh Penalty on 4 Cooperative Banks

Moneylife Digital Team 10 September 2024

Investor Interest

Reserve Bank of India (RBI) has imposed a penalty of Rs10.50 lakh on four cooperative banks for non-compliance with the directions issued by the banking regulator. The highest penalty of Rs4.50 lakh has been imposed on Samarth Sahakari Bank Ltd from Maharashtra.

Other banks penalised by RBI are: Nagrik Sahakari Bank Maryadit and Jila Sahakari Kendriya Bank Maryadit from Chhattisgarh and Jila Sahakari Kendriya Bank Maryadit from Madhya Pradesh (MP).

Samarth Sahakari Bank has been penalised for violating Section 12(2) of the Banking Regulation Act (BR Act) and for failing to comply with RBI guidelines on exposure norms and statutory restrictions applicable to urban cooperative banks (UCBs). Additionally, the Bank did not adhere to operational instructions issued by the RBI under the supervisory action framework (SAF) for primary UCBs.

RBI's statutory inspection revealed several regulatory violations by Samarth Sahakari Bank. The Bank refunded share capital to its members, despite its last assessed capital to risk-weighted assets Ratio (CRAR) being below the required 9%. It also sanctioned loans to nominal members beyond the prescribed regulatory limits and offered deposit interest rates higher than those of the State Bank of India (SBI), violating operational instructions issued under SAF for UCBs.

Nagrik Sahakari Bank has been fined Rs3.50 lakh for failing to comply with RBI directions on exposure norms and statutory or other restrictions for UCBs and investments by primary UCBs. The Bank sanctioned loans to its nominal members exceeding the prescribed regulatory limit and violated the prudential inter-bank gross exposure and counterparty limits.

Chhattisgarh and MP-based Jila Sahakari Kendriya Bank Maryadit are penalised Rs1.50 and Rs1 lakh, respectively for violating provisions of Section 26A of the BR Act. RBI found that both these banks failed to transfer eligible amounts to the depositor education and awareness fund (DEAF) within the prescribed period, leading to penalties.

RBI says its action against these four 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.

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