RBI Slaps Rs13 Lakh Penalty on 2 Cooperative Banks from Uttar Pradesh, 1 from Uttarakhand

Moneylife Digital Team 29 August 2024

Investor Interest

Reserve Bank of India (RBI) has imposed a penalty of Rs13 lakh two cooperative banks from Uttar Pradesh (UP) and one from Uttarakhand for non-compliance with the directions issued by the banking regulator. A maximum penalty of Rs8 lakh has been imposed on UP-based Mahoba Urban Cooperative Bank Ltd.

The other cooperative banks penalised by RBI are: UP Postal Primary Cooperative Bank Ltd and Uttarakhand-based Uttarkashi Zila Sahkari Bank Ltd.

Mahoba Urban Cooperative Bank was penalised for contravention of the provisions of section 26A(2) of the Banking Regulation Act (BR Act), non-compliance with directions issued by RBI on income recognition, asset classification, provisioning and other related matters—urban cooperative banks (UCBs) and exposure norms and statutory or other restrictions—UCBs.

RBI's statutory inspection revealed that Mahoba Urban Cooperative Bank failed to transfer eligible amounts to the depositor education and awareness fund (DEAF) within the prescribed period, did not classify certain loan accounts as non-performing assets (NPAs) and breached the prudential single borrower exposure limit.

UP Postal Primary Cooperative Bank was penalised Rs3 lakh for not complying with directions issued by the RBI under the supervisory action framework (SAF). RBI found that the Bank had violated SAF guidelines by offering higher interest rates on deposits than those provided by the State Bank of India (SBI).

Uttarkashi Zila Sahkari Bank was penalised Rs2 lakh for contravention of section 20(1) and section 26A (2) of the BR Act. RBI found out that the Bank had sanctioned loans to individuals where one of its directors stood as guarantor. The lender also failed to transfer 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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