RBI Slaps Rs11.50 Lakh Penalty on 3 Cooperative Banks from Uttar Pradesh

Moneylife Digital Team 22 May 2024

Investor Interest

Reserve Bank of India (RBI) has imposed a penalty of Rs11.50 lakh on three cooperative banks from Uttar Pradesh (UP) for non-compliance with the directions issued by the banking regulator. A maximum penalty of Rs7 lakh has been imposed on Urban Cooperative Bank Ltd.

The other cooperative banks penalised by RBI are: Noida Commercial Cooperative Bank Ltd and Bhadohi Urban Cooperative Bank Ltd

Urban Cooperative Bank has been penalised for contravention of the provisions of Section 26 A (2) of the Banking Regulation Act (BR Act), for non-compliance with the specific directions issued by RBI under supervisory action framework (SAF) on investments by primary (Urban) cooperative banks (UCBs).

RBI's statutory inspection revealed that Urban Cooperative Bank had not transferred eligible amounts to the depositor education and awareness fund (DEAF) within the prescribed period. The Bank also offered interest rates higher than those offered by the State Bank of India (SBI) on deposits of various tenors and sanctioned fresh loans and advances carrying risk weights more than 100% in violation of specific instructions issued under SAF and breached the prudential inter-bank exposure limit on a gross as well as counterparty basis.

Noida Commercial Cooperative Bank was fined Rs2.50 lakh for contravention of the provisions of Section 26 A (2) of the BR Act and for non-compliance with the directions issued by RBI on loans and advances to directors, their relatives and firms or concerns in which they are interested and master circular on frauds - classification and reporting. RBI found that the Bank had not transferred eligible amounts to DEAF within the prescribed period, sanctioned a director related loan and not classified and reported a fraud.

Bhadohi Urban Cooperative Bank was penalised Rs2 lakh for contravention of the provisions of Section 26 A (2) of the BR Act. RBI found that the Bank had not transferred eligible amounts to DEAF within the prescribed period.

RBI, however, clarifies that its action against these three 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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