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RBI Imposes Rs8 Lakh Penalty on 5 Cooperative Banks for Violation of Rules
Moneylife Digital Team 19 December 2023
Investor Interest
Reserve Bank of India (RBI) has imposed monetary penalties on five cooperative banks for violating various rules and regulations prescribed by RBI. Of these, three banks are from Maharashtra, while others belong to West Bengal and Gujarat. RBI levied a penalty of Rs3 lakh, the highest among five banks, on Maharashtra-based Manmandir Cooperative Bank Ltd.
 
The Manmandir Cooperative Bank fined Rs3 lakh for non-compliance with the directions issued by RBI on know your customer (KYC) directions and maintenance of deposit accounts - primary urban cooperative banks (UCBs).
 
The statutory inspection of Manmandir Cooperative Bank about its financial position as of 31 March 2022 and examination of the risk assessment report (RAR) and all correspondence related revealed that the Bank had not ensured periodic updation of KYC for high-risk customers as mandated by the RBI directions and not conducted periodic review of risk categorisation of accounts. Manmandir Cooperative Bank did not conduct the annual review of inoperative or dormant accounts.
 
Lakhvad Nagarik Sahakari Bank Ltd from Gujarat was penalised Rs2 lakh for non-compliance with the directions issued by RBI on loans and advances to directors, relatives and firms or concerns in which they are interested. The Bank had sanctioned a loan to the relative of one of its directors and also sanctioned certain loans where the relatives of its directors stood as guarantors. Lakhvad Nagarik Sahakari Bank also found breaching the prudential inter-bank gross exposure limit as well as the prudential inter-bank counterparty exposure limit. 
 
Further, Sarvodaya Cooperative Bank Ltd and Sanmitra Sahakari Bank Ltd from Maharashtra and Contai Cooperative Bank Ltd from West Bengal were slapped with a fine of Rs1 lakh each.
 
Sarvodaya Cooperative Bank was penalised for non-compliance with the specific directions issued by RBI under supervisory action framework (SAF). The Bank had sanctioned fresh loans violating particular orders issued under SAF by the banking regulator.
 
The penalty on Sanmitra Sahakari Bank Ltd has been imposed for non-compliance with the directions issued by RBI on the maintenance of deposit accounts - primary UCBs.The RAR, inspection report (IR) and all correspondence related revealed that the Bank had collected fixed penal charges for shortfall in maintenance of minimum balance in savings bank accounts, instead of proportionate to the extent of shortfall.
 
Contai Cooperative Bank Ltd was fined for non-compliance with the directions issued by RBI on KYC. The Bank had failed to put in place a system of periodic review of risk categorisation of accounts.
 
“After considering the reply and oral submissions of all banks during the personal hearing, RBI concluded that the charges of non-compliance with directions were substantiated and warranted imposition of monetary penalty,” the central bank says.
 
RBI says the penalty imposed on these five cooperative banks is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered by the banks with its customers.
 
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