Reserve Bank of India (RBI) has imposed penalties of Rs1.16 crore on 15 financial institutions, including nine cooperative Banks, three non-banking financial companies (NBFCs), two housing finance companies (HFCs) and one asset reconstruction company (ARC) for non-compliance with the directions issued by the banking regulator. The highest penalty of Rs52.70 lakh has been imposed on Maharashtra-based Phoenix ARC Pvt Ltd.
Other entities penalised by RBI include: Karnataka-based South Canara District Central Cooperative (DCC) Bank Ltd, Mysore and Chamarajnagar DCC Bank Ltd, Habitat Micro Build India Housing Finance Company Pvt Ltd and Karnataka Gramin Bank.
Additionally, RBI imposed penalties on Tamil Nadu-based Savery Transport Finance Ltd, Purvaja Fincap Pvt Ltd and Vellore Cooperative Town Bank Ltd, Gujarat-based Porbandar Commercial Cooperative Bank Ltd and Santrampur Urban Cooperative Bank Ltd, Maharashtra-based Mahindra Rural Housing Finance Ltd, Jalandhar-based Citizens Urban Cooperative Bank Ltd, Himachal Pradesh-based Kangra Central Cooperative Bank Ltd and New Delhi-based UCA Finvest Pvt Ltd.
Phoenix ARC has been penalised for non-compliance with directions issued by RBI on the settlement of dues payable by the borrower.
RBI's statutory inspection revealed that Phoenix ARC settled dues of some borrowers having aggregate outstanding principal amounts of more than Rs1 crore without the prior approval of its board of directors, as required under the directions on settlement of dues payable by the borrower.
South Canara DCC Bank and Mysore and Chamarajnagar DCC Bank have been penalised Rs5 lakh and Rs1 lakh, respectively, for contravention of provisions of Section 20 of the Banking Regulation Act(BR Act). Both the lenders had sanctioned director-related loans.
RBI conducted a statutory inspection of Habitat Micro Build India Housing Finance Company, an HFC from Karnataka and found that the company had failed to obtain prior written permission of the central bank for effecting change in management, resulting in change of more than 30% of its directors, excluding independent directors. As a result, RBI imposed a penalty of Rs50,000 on the HFC.
Karnataka Gramin Bank has been penalised Rs1 lakh for non-compliance with directions issued by RBI on strengthening prudential norms- provisioning asset classification and exposure limit read with income recognition, asset classification and provisioning norms guidelines. The lender failed to classify certain loan accounts as non-performing assets
Savery Transport Finance, an NBFC based in Tamil Nadu, has been fined Rs5 lakh by the RBI for non-compliance with provisions of the master direction-RBI-NBFC -Scale-Based Regulation Directions, 2023. The NBFC failed to define the method of applying interest rates in its loan agreements, charged interest rates higher than those stated in the agreements and did not update the interest rates or the approach for risk gradation on its website.
The correspondence pertaining to the pre-mature redemption of subordinated debts revealed that Purvaja Fincap had pre-maturely redeemed subordinated debts without the consent of RBI. As a result, RBI imposed a penalty of Rs50,000 on Purvaja Fincap.
Vellore Cooperative Town Bank and Porbandar Commercial Cooperative Bank have each been penalised Rs50,000 for non-compliance with certain directions issued by RBI under know-your-customer (KYC). Both the lenders failed to upload the KYC records of customers onto Central KYC Records Registry (CKYCR) within the prescribed timeline.
Santrampur Urban Cooperative Bank has been fined Rs1 lakh for non-compliance with directions issued by RBI on cooperative banks' interest rate on deposits and KYC. The lender failed to pay the applicable interest on the maturity amount of the unpaid matured term deposits and carry out periodic reviews of risk categorisation of certain accounts at least once in six months.
Mahindra Rural Housing Finance, an HFC based in Maharashtra, has been penalised Rs3.20 lakh for non-compliance with provisions of the RBI-KYC directions, 2016 and NBFC-HFC Reserve Bank Directions, 2021.
RBI found that Mahindra Rural Housing Finance failed to conduct a periodic review of risk categorisation at least once every six months during the FY22-23. Additionally, the company appointed a director without obtaining prior written permission from RBI, leading to a change in management, as more than 30% of its directors excluding independent directors, were replaced.
Citizens Urban Cooperative Bank has been penalised Rs15 lakh for non-compliance with directions issued by RBI under the supervisory action framework (SAF). RBI found in non-adherence to directions issued under SAF, the lender sanctioned or renewed loans and advances to single borrowers beyond the applicable regulatory limits and offered interest rates on term deposits and savings deposits higher than those offered by State Bank of India (SBI).
Kangra Central Cooperative has been penalised Rs25 lakh for non-compliance with the conditions subject to which the banking licence was issued to it by RBI. The lender extended loans outside its area of operation in violation of conditions of the banking license.
Lastly, New Delhi-based UCA Finvest has been fined Rs4.10 lakh for non-compliance with specific conditions under which RBI issued the company the certificate of registration (CoR) under Section 45IA(5) of Reserve Bank of India Act, 1934 (RBI Act). The company, in violation of the specific conditions of the CoR, had accepted public funds and customer interface when it sanctioned loans and advances.
In all 15 cases, RBI says the 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.
