RBI Imposes Rs9.25 lakh Penalties on 5 Cooperative Banks for Not Following Rules & Regulations

Moneylife Digital Team 28 March 2024

Reserve Bank of India (RBI) has imposed a penalty of Rs9.25 lakh on five cooperative banks for non-compliance with the directions issued by the banking regulator. The highest penalty of Rs6 lakh has been imposed on Himachal Pradesh-based Mandi Urban Cooperative Bank Ltd.

Other banks penalised by RBI are: Howrah District Central Cooperative Bank Ltd from West Bengal, Excellent Cooperative Bank Ltd from Mumbai, Rajapalayam Cooperative Urban Bank Ltd from Tamil Nadu and Standard Urban Cooperative Bank Ltd from Aurangabad.

Mandi Urban Cooperative Bank was penalised for non-compliance with certain provisions of RBI directions on the placement of deposits with other banks by primary urban cooperative banks (UCBs).

During its inspection, RBI found that the charge of breaching the prudential inter-bank exposure limit was sustained on a gross and counterparty basis.

Howrah District Central Cooperative Bank was penalised Rs1 lakh for non-compliance with the directions on know-your-customer (KYC). The Bank failed to undertake periodic updates to the KYC of customer accounts and was unable to put in place a system of risk categorisation of accounts, RBI says.

The statutory inspection conducted by RBI revealed that Rajapalayam Cooperative Urban Bank had extended loans to the relatives of directors and sanctioned loans to nominal members above the prescribed ceiling. It imposed a penalty of Rs75,000 on the Bank.

Excellent Cooperative Bank and Standard Urban Cooperative Bank were penalised Rs1 lakh and Rs50,000, respectively, for contravention of the provisions of section 26A of the Banking Regulation Act (BR Act). RBI discovered that the charge for not transferring the eligible amount to the depositor education and awareness fund (DEAF) was sustained.

RBI, however, clarifies that its action against these five banks is based on deficiencies in regulatory compliance and not intended to pronounce on the validity of any transaction or agreement entered into by the banks with their customers.

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