RBI Imposes Rs4.70 Lakh Penalty on 5 Cooperative Banks for Non-compliance

Moneylife Digital Team 05 November 2024

Investor Interest

Reserve Bank of India (RBI) has imposed a penalty of Rs4.70 lakh on five cooperative banks for non-compliance with the directions issued by the banking regulator. The highest penalty of Rs1.50 lakh has been imposed on Sahyog Urban Cooperative Bank Ltd from Maharashtra and Rander People's Cooperative Bank Ltd from Gujarat.

Other banks penalised by RBI are: Tura Urban Cooperative Bank Ltd from Meghalaya and Mehmadabad Urban People's Cooperative Bank Ltd and Jambusar People's Cooperative Bank Ltd from Gujarat.

Sahyog Urban Cooperative Bank has been penalised for contravention of the provisions of Section 26A of the Banking Regulation Act (BR Act).

"The statutory inspection of Sahyog Urban Cooperative Bank conducted by RBI with reference to its financial position as of 31 March 2023 revealed that the Bank had not transferred the eligible amount to the depositor education and awareness fund (DEAF) within the prescribed time," RBI says.

Rander People's Cooperative Bank has been penalised for violating Section 26A of the BR Act and failing to comply with RBI directives related to know-your-customer (KYC) regulations. RBI found that the Bank had not transferred eligible amounts to the DEAF within the required timeframe, conducted risk-based updates of KYC for its customers, and did not put in place a system of periodic review of risk categorisation of accounts at least once in six months.

Meghalaya-based Tura Urban Cooperative Bank has been penalised Rs1 lakh for non-compliance with specific directions issued by RBI under the supervisory action framework (SAF). The Bank had incurred capital expenditure exceeding Rs25,000 per year without prior approval of RBI in non-adherence to directions issued under SAF. It sanctioned fresh loans over the exposure limit prescribed under SAF.

RBI's statutory inspection of Mehmadabad Urban People's Cooperative Bank found that the lender failed to submit data to three credit information companies (CICs) and provided incomplete data to one of them. Additionally, the Bank did not conduct the required periodic reviews of account risk categorisation at least every six months. As a result, RBI has imposed a penalty of Rs60,000 on Mehmadabad Urban People's Cooperative Bank.

Further, Jambusar People's Cooperative Bank has been fined Rs10,000 for non-compliance with directions issued by RBI on membership of CICs by cooperative banks. The Bank failed to submit data to any of the CICs.

RBI says its action against these five 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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