Reserve Bank of India (RBI) has imposed penalties of Rs25.95 lakh on nine cooperative Banks and one non-banking financial company (NBFC) for noncompliance with the directions issued by the banking regulator. The highest penalty of Rs15 lakh has been imposed on Mumbai-based NKGSB Cooperative Bank Ltd.
Other entities penalised by RBI include Maharashtra-based Jalna People's Cooperative Bank Ltd, Karnataka-based Sri Ganesh Cooperative Bank Ltd, Tumkur Veerashaiva Cooperative Bank Ltd, Bagalkot District Central Cooperative Bank Ltd and Kerala Mercantile Cooperative Bank Ltd.
Other penalised lenders include Odisha-based Cooperative Urban Bank Ltd, Tamil Nadu's Sholinghur Cooperative Urban Bank Ltd and Telangana-based Nizamabad District Cooperative Central Bank Ltd.
Mikhael Capitalize Pvt Ltd, an NBFC from Kerala, is also penalised.
NKGSB Cooperative Bank has been penalised for noncompliance with directions issued by RBI on the management of advances-urban cooperative banks (UCBs). RBI's statutory inspection revealed that the lender had sanctioned or granted certain loans for the purchase of gold.
Further, Jalna People's Cooperative Bank has been penalised Rs75,000 for noncompliance with the RBI Directions on gold loan – bullet repayment – Primary UCBs. RBI discovered that the lender had sanctioned gold loans under the bullet repayment scheme beyond the prescribed regulatory limit.
RBI conducted a statutory inspection of Sri Ganesh Cooperative Bank and found that the lender breached the prudential inter-bank (gross) and counterparty exposure limits and made some donations in excess of the prescribed regulatory limit. As a result, RBI imposed a penalty of Rs2.50 lakh on Ganesh Cooperative Bank.
Bagalkot District Central Cooperative Bank and Nizamabad District Cooperative Central Bank have been fined Rs1 lakh each for contravention of provisions of Section 20 of the Banking Regulation Act (BR Act). Both the lenders had sanctioned certain loans to their directors.
Tumkur Veerashaiva Cooperative Bank has been fined Rs50,000 for failing to comply with specific RBI directives under the supervisory action framework (SAF). The lender violated regulations by sanctioning fresh loans and advances with a risk weight exceeding 100%, failing to reduce its exposure to sectors with high levels of non-performing assets (NPAs) and not controlling its operating and administrative expenses.
Mikhael Capitalize, an NBFC from Kerala, has been fined Rs1 lakh for noncompliance with some provisions of the master direction – NBFC non-systemically important non-deposit taking company RBI Directions, 2016, along with the master direction – RBI NBFC-Scale Based Regulation Directions, 2023.
RBI found that Mikhael Capitalize failed to obtain prior written permission for a change in shareholding exceeding 26% of its paid-up equity capital. Additionally, it did not inform the RBI about the appointment of an independent director within the prescribed timeline.
Kerala Mercantile Cooperative Bank has been fined Rs50,000 for noncompliance with specific directions issued by RBI under SAF. The lender incurred capital expenditure, much in excess of the permitted limit, without prior approval of RBI in non-adherence to specific directions issued under SAF.
Odisha-based Cooperative Urban Bank has been penalised Rs2.70 lakh for noncompliance with directions issued by RBI on exposure norms and statutory or other restrictions- UCBs and credit information companies (CICs) membership by cooperative banks. RBI found that the Odisha-based lender had breached prudential inter-bank (gross) and counterparty exposure limits and failed to obtain membership in two CICs.
Sholinghur Cooperative Urban Bank from Tamil Nadu was fined Rs1 lakh for non-compliance with directions issued by RBI on exposure norms and statutory or other restrictions - UCBs and know-your-customer (KYC). RBI statutory inspection revealed that the lender had sanctioned loans to nominal members more than the prescribed regulatory limit and failed to upload the KYC records of customers onto the central KYC records registry (CKYCR) within the stipulated timeline.
In all ten cases, RBI said penalties are based on deficiencies in regulatory compliance and are not intended to pronounce on the validity of any transaction or agreement they entered into with their customers.
