RBI Slaps Rs4.50 Lakh Penalty on 2 Gujarat-based Cooperative Banks

Moneylife Digital Team 10 December 2024

Investor Interest

The Reserve Bank of India (RBI) has imposed a total penalty of Rs4.50 lakh on Gujarat-based Apani Sahkari Bank Ltd and Halol Mercantile Cooperative Bank Ltd for failing to follow directions issued by the banking regulator.

In a release, RBI says it imposed a penalty of Rs3.50 lakh on Apani Sahkari Bank for contravention of provisions of Section 26A of the Banking Regulation Act (BR Act) and non-compliance with directions on loans and advances to directors, their relatives and firms or concerns in which they are interested and placement of deposits with other banks by primary urban cooperative banks (UCBs) and know-your-customer (KYC) norms.

During a statutory inspection, RBI found several lapses in the Apani Sahkari Bank's operations. The lender failed to transfer eligible unclaimed amounts to the depositor education and awareness fund (DEA Fund) within the prescribed timeframe. Additionally, it sanctioned a loan to a relative of is director, violating regulatory norms.

The inspection also revealed breaches of prudential inter-bank (gross) and counterparty exposure limits. Furthermore, Apani Sahkari Bank did not upload the KYC records of some customers to the Central KYC Records Registry within the required timeline. It also failed to carry out risk categorisation for specific customers as mandated.

Halol Mercantile Cooperative Bank was penalised Rs1 lakh for non-compliance with directions issued by RBI on donations to trusts and institutions where directors or their relatives hold a position or are interested, as well as loans and advances to directors, their relatives and firms or concerns in which they are interested.

The lender donated some amount to a trust in which Halol Mercantile Cooperative Bank's director was interested and sanctioned a loan in which a relative of its director stood as a guarantor.

"After considering the reply and oral submissions of both the banks during the personal hearing, RBI concluded that the charges of non-compliance with directions were substantiated and warranted imposition of monetary penalty," RBI says.

In both cases, RBI says the penalties are based on deficiencies in regulatory compliance and are not intended to be pronounced on the validity of any transaction or agreement they entered into with their customer.

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