RBI Imposes Rs12.75 Lakh Penalty on 3 Cooperative Banks from Gujarat, 1 each from Telangana and Tamil Nadu

Moneylife Digital Team 09 January 2024

Investor Interest

Reserve Bank of India (RBI) has imposed a penalty of Rs12.75 lakh on five cooperative banks, including three from Gujarat and one each from Telangana and Tamil Nadu, for non-compliance with the directions issued by the banking regulator.

The highest penalty of Rs7 lakh has been imposed on Navsarjan Industrial Cooperative Bank Ltd from Gujarat. Other banks fined by RBI include Mehsana Jilla Panchayat Karmachari Cooperative Bank Ltd and Halol Urban Cooperative Bank Ltd from Gujarat, Stambhadri Cooperative Urban Bank Ltd from Telangana, and Subramanianagar Cooperative Urban Bank Ltd from Tamil Nadu.

Navsarjan Industrial Cooperative Bank failed to comply with directions on the placement of deposits with other banks by primary urban cooperative banks (UCBs), RBI directions on know your customer (KYC) and contravention of the Banking Regulation Act(BR Act).

"The statutory inspection of the Bank conducted by RBI concerning its financial position as of 31 March 2022 and examination of the inspection report (IR), risk assessment report (RAR) and all correspondence revealed that Navsarjan Industrial Cooperative had breached inter-bank gross as well as counterparty exposure limits. The Bank had not reviewed risk categorisation of accounts as per prescribed periodicity and not transferred eligible amount to Depositor Education and Awareness (DEA) Fund," RBI says.

The Mehsana Jilla Panchayat Karmachari Cooperative Bank was fined Rs3 lakh for non-compliance with RBI directions on placement of deposits with other banks by primary UCBs and contravention of the BR Act. The Bank had breached the prudential inter-bank counterparty exposure limit and not transferred eligible amounts to DEA Fund.

Stambhadri Cooperative Urban Bank and Subramanianagar Cooperative Urban Bank faced penalties of Rs50,000 and Rs25,000, respectively, due to their non-compliance with the RBI directives and guidelines about loans and advances granted to directors, their relatives, and entities in which they hold an interest. Both banks were penalised for extending loans to a director and the director's relatives.

Statutory inspection for the year ending 31 March 2022 and examination of the IR, RAR and all related correspondence revealed that Halol Urban Cooperative Bank from Gujarat sanctioned a loan where a relative of one of the directors of the bank stood as guarantor, breached prudential inter-bank counterparty exposure limit and not paid interest in matured term deposits from the date of maturity till the date of their repayment at the applicable rate.

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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