RBI Imposes Rs13.10 Lakh Penalty on 5 Cooperative Banks

Moneylife Digital Team 31 October 2023

Investor Interest

Reserve Bank of India (RBI) has imposed Rs13.10-lakh penalty on five cooperative banks for violating rules and regulations prescribed by the regulator. Of these, three banks are from Gujarat, while others belong to West Bengal and Mizoram. RBI has levied a fine of Rs7 lakh, the highest among the banks, on Uma Cooperative Bank Ltd from Gujarat.

Other banks penalised by RBI are: Shihori Nagarik Sahakari Bank Ltd and Pij People’s Co-operative Bank Limited from Gujarat, while Birbhum District Central Cooperative Bank Ltd is from West Bengal and Mizoram Cooperative Apex Bank Ltd from Mizoram.

Uma Cooperative Bank Ltd has been penalised Rs7 lakh for contravention of directions issued by RBI on placement of deposits with other banks by primary urban cooperative banks (UCBs).The statutory inspection of the Bank conducted by RBI with reference to its financial position as on 31 March 2022, and examination of the inspection report(IR) , risk assessment report (RAR) and all correspondence related revealed, that the Bank had breached the prescribed inter-bank counterparty exposure limit and breached the prescribed inter-bank gross exposure limit.

RBI imposed a penalty of Rs2 lakh on Pij People’s Cooperative Bank Limited for non-compliance with the directions issued by RBI on Reserve Bank of India on know-your-customer (KYC) . The Bank had failed to carry out periodic review of risk categorisation of accounts.

Similarly, a Rs2 lakh fine has been imposed on Mizoram Cooperative Apex Bank Ltd for non-compliance with the directions issued by RBI on housing finance applicable to state cooperative banks. The statutory inspection of the Bank conducted by National Bank for Agriculture and Rural Development (NABARD) with reference to its financial position as on 31 March 2022, and examination of the IR and all correspondence related revealed, that the Bank’s total exposure to housing finance was above the prescribed limit.

Further, Birbhum District Central Cooperative Bank Ltd, was penalised with Rs1.10 lakh for non-compliance with the directions issued by RBI on KYC and membership of credit information companies (CICs).The statutory inspection of the Bank conducted by NABARD with reference to its financial position revealed, that the Bank had failed to carry out periodic review of risk categorisation of accounts. The Bank also failed to undertake risk categorisation of a number of accounts and had failed to obtain membership of three out of the four CICs.

Shihori Nagarik Sahakari Bank Ltd from Gujarat was penalised Rs1 lakh for non-compliance with directions issued by RBI on loans and advances to directors, relatives and firms or concerns in which they are interested in where directors stood as surety or guarantors—clarification and placement of deposits with other banks by primary UCBs.The statutory inspection of the Bank revealed that the Bank had sanctioned loans where relatives of directors of the Bank stood as guarantors and the Bank breached the prescribed inter-bank counterparty exposure limit.

The central Bank says, "After considering the reply and oral submissions of all banks during the personal hearing, RBI came to the conclusion that the charges of non-compliance with RBI directions were substantiated and warranted imposition of monetary penalty."

In all five cases, RBI said penalties are based on deficiencies in regulatory compliance and are not intended to be pronounced on the validity of any transaction or agreement they entered into with their customers.

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