RBI Imposes Rs8.55 Lakh Penalty on 4 Cooperative Banks, 1 NBFC

Moneylife Digital Team 18 February 2025

Investor Interest

Reserve Bank of India (RBI) has imposed penalties of Rs8.55 lakh on four cooperative Banks and a non-banking financial company (NBFC) for non-compliance with the directions issued by the banking regulator. The highest penalty of Rs4.20 lakh has been imposed on Madhya Pradesh (MP)-based Laxmibai Mahila Nagrik Sahakari Bank Maryadit.

The other lenders penalised by RBI include: Jharkhand-based Pinnacle Capital Solutions Pvt Ltd, Bihar-based Muzzafarpur Central Cooperative Bank Ltd, Madhya Pradesh-based Shree Balaji Urban Cooperative Bank Ltd and Maharashtra-based Dhule and Nandurbar District Central Cooperative Bank Ltd.

Laxmibai Mahila Nagrik Sahakari Bank has been penalised for non-compliance with directions issued by RBI on loans and advances to directors, their relatives and firms or concerns in which they are interested and priority sector lending (PSL) —targets and classification and specific directions issued by RBI on contributing to micro and small enterprises (MSE) refinance fund due to shortfall in achievement of PSL.

RBI's statutory inspection revealed two key issues with Laxmibai Mahila Nagrik Sahakari Bank. First, the MP-based Bank sanctioned director-related loans. Second, it failed to deposit the specified amount in the MSE refinance fund maintained with Small Industries Development Bank of India (SIDBI) against the shortfall in achievement of PSL target for FY22-23, even after the issuance of a cautionary letter, within the prescribed time.

Pinnacle Capital Solutions, an NBFC based in Jharkhand, was fined Rs2 lakh for not complying with RBI guidelines on credit and debit card issuance, conduct directions and digital lending. The NBFC issued credit lines similar to credit cards to some borrowers without obtaining prior approval from RBI. Additionally, it disbursed loans to borrowers through a pass-through account managed by a third party.

RBI conducted a statutory inspection of Shree Balaji Urban Cooperative Bank and found that the lender did not deposit the required amount in the MSE refinance fund maintained with SIDBI. This deposit was necessary to cover the shortfall in meeting the PSL target for FY22-23. Despite receiving a cautionary letter, the lender failed to make the deposit within the specified timeframe.

As a result, RBI imposed a penalty of Rs1.10 lakh on Shree Balaji Urban Cooperative Bank.

Further, Bihar-based Muzaffarpur Central Cooperative Bank Ltd was penalised Rs1 lakh for not complying with RBI guidelines on know-your-customer (KYC) norms. The lender failed to conduct periodic updates of its customers' KYC details.

Dhule and Nandurbar District Central Cooperative Bank was penalised Rs25,000 for non-compliance with directions issued by RBI on membership of credit information companies (CICs) by Cooperative Banks. The lender had failed to submit the credit information of its borrowers to any of the four CICs.

In all five 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.

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