RBI Slaps Rs16 Lakh Penalty on 3 Cooperative Banks from Uttar Pradesh, 1 from Haryana

Moneylife Digital Team 16 April 2024

Reserve Bank of India (RBI) has imposed a penalty of Rs16 lakh on three cooperative banks from Uttar Pradesh (UP) and one from Haryana for non-compliance with the directions issued by the banking regulator. The highest penalty of Rs5 lakh each has been imposed on UP-based Urban Cooperative Bank Ltd and Nagar Sahkari Bank Ltd.

Other banks penalised by RBI are: Haryana-based Panchkula Urban Cooperative Bank Ltd and UP-based United Mercantile Urban Cooperative Bank Ltd.

Urban Cooperative Bank was penalised for non-compliance with prohibitory orders or directions issued by RBI under the supervisory action framework (SAF) for primary urban cooperative banks (UCBs).

RBI's statutory inspection revealed that on term and savings deposits, Urban Cooperative Bank was offering higher interest rates than those offered by State Bank of India (SBI) in contravention of specific instructions issued under the SAF.

Nagar Sahkari Bank was penalised for non-compliance with directions issued by RBI under SAF. RBI says that the charge of incurring operating expenses on gifting silver coins to shareholders, despite specific directions under SAF to curtail operating and administrative expenses to the maximum extent possible, is sustained against the lender.

Haryana-based Panchkula Urban Cooperative Bank was fined Rs3 lakh for non-compliance with RBI directions on exposure norms and statutory or other restrictions – UCBs. RBI found that the charge against Panchkula Urban Cooperative Bank of breaching prudential inter-bank exposure limit on a gross and counterparty basis was sustained.

Further, RBI conducted the statutory inspection of United Mercantile Urban Cooperative Bank regarding its financial position as of 31 March 2022, revealing that the charge of offering higher interest rates on term and savings deposits than those provided by SBI in contravention of specific directions issued under SAF was sustained.

RBI, therefore, imposed a penalty of Rs3 lakh on United Mercantile Urban Cooperative Bank.

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

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