RBI Slaps Rs1 Lakh Penalty Each on 5 Cooperative Banks

Moneylife Digital Team 26 April 2024

Reserve Bank of India (RBI) has imposed a penalty of Rs1 lakh each on five cooperative banks for non-compliance with the directions issued by the banking regulator.

The banks penalised by RBI are Madhya Pradesh (MP)-based Sadbhav Nagarik Sahakari Bank Maryadit, Chhattisgarh-based Bilaspur Nagrik Sahakari Bank Ltd, West Bengal-based Bishnupur Town Cooperative Bank Ltd, Maharashtra-based Dr Jaiprakash Mundada Urban Cooperative Bank Ltd and Uttar Pradesh (UP)-based Nagar Sahakari Bank Ltd.

Sadbhav Nagarik Sahakari Bank was penalised for non-compliance with operational instructions issued by RBI under the supervisory action framework (SAF) for primary urban cooperative banks (UCBs). RBI found out that the charge of not reducing single borrower exposure limit for fresh loans and advances by 50% of the applicable regulatory limit in violation of specific directions issued under SAF was sustained.

West Bengal-based Bishnupur Town Cooperative Bank was fined for non-compliance with RBI directions on know your customer (KYC). RBI statutory inspection found that the charge of not adopting any system of periodic review of risk categorisation of its accounts at least once in six months was sustained.

Bilaspur Nagrik Sahakari Bank was penalised for non-adherence with the directions issued by RBI to UCBs on exposure norms and statutory or other restrictions. During its inspection, RBI found that the charge of non-adherence to prudential inter-bank gross exposure limit was sustained.

The statutory inspection conducted by RBI revealed that Maharashtra-based Dr Jaiprakash Mundada Urban Cooperative Bank had sanctioned gold loans beyond the prescribed ceiling under the bullet repayment scheme and extended loans beyond the prescribed ceiling to nominal members.

Further, RBI conducted the statutory inspection of Nagar Sahakari Bank regarding its financial position as of 31 March 2022, revealing that the charge of offering higher interest rates on term deposits than those provided by State Bank of India (SBI) in contravention of specific directions issued under SAF 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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