RBI Slaps Rs5.98 Crore Penalty on 3 Cooperative Banks for Regulatory Violations

Moneylife Digital Team 15 July 2024

Reserve Bank of India (RBI) has imposed a penalty of Rs5.98 crore on three cooperative banks for non-compliance with the directions issued by the banking regulator. The highest penalty of Rs5.93 crore has been imposed on Mehsana Urban Cooperative Bank Ltd from Gujarat.

Other banks penalised by RBI are: Jilla Sahakari Kendriya Bank Maryadit from Madhya Pradesh and Pusad Urban Co-operative Bank Ltd from Maharashtra.

Mehsana Urban Cooperative Bank incurred a penalty of Rs5,93,30,000 (five crore ninety three lakh thirty thousand rupees) for non-compliance with RBI directives.

RBI statutory inspection revealed several issues with Mehsana Urban Cooperative Bank.

The Bank sanctioned or renewed multiple credit facilities, both fund-based and non-fund-based, to companies or concerns where the directors or their relatives had interests, despite having been penalised for similar actions earlier. Additionally, the Bank failed to implement basic cyber security control measures and requirements as prescribed by the RBI's cyber security framework. It also did not classify credit facilities of certain borrowers as non-performing assets (NPAs), allotted multiple unique customer identification codes (UCICs) to many individual customers and made donations to trusts or institutions where its director held a position or had an interest.

Further, Pusad Urban Cooperative Bank Ltd was fined Rs2.50 lakh for contravening specific directions issued by RBI under the supervisory action framework (SAF) for primary UCBs. RBI found that the Bank had offered interest rates on deposits higher than those offered by the State Bank of India (SBI), thereby violating the SAF directions.

Madhya Pradesh-based Jilla Sahakari Kendriya Bank Maryadit was fined Rs2.50 lakh for violating Section 26A of the Banking Regulation Act (BR Act). RBI found that the Bank failed to transfer eligible amounts to the Depositor Education and Awareness Fund (DEAF) within the specified 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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