3 Coop Banks Penalized; Fine Rs8 Lakh

These actions on 3 coop banks are based on deficiencies in regulatory compliance

FinTech BizNews Service

Mumbai, 5 December, 2024: The Reserve Bank of India (RBI) has, by separate orders in December 2024, imposed a monetary penalty on 3 co-operative banks. These actions on the concerned coop banks are based on deficiencies in regulatory compliance, as per the press releases issued by the RBI on 5th December, 2024.

RBI has imposed monetary penalty on Bapatla Co-operative Urban Bank, Andhra Pradesh; Kulithalai Co-operative Urban Bank, Tamil Nadu and Zila Sahkari Bank Ltd., Mirzapur. 

The Reserve Bank of India (RBI) has, by an order dated December 04, 2024, imposed a monetary penalty of Rs2.00 lakh (Rupees Two lakh only) on The Bapatla Co-operative Urban Bank Ltd., Andhra Pradesh (the bank) for non-compliance with certain directions issued by RBI on ‘Loans and advances to directors, their relatives, and firms / concerns in which they are interested’, ‘Exposure Norms and Statutory / Other Restrictions - UCBs’ and ‘Know Your Customer (KYC)’. This penalty has been imposed in exercise of powers conferred on RBI, under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.

The statutory inspection of the bank was conducted by RBI with reference to its financial position as on March 31, 2023. Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said directions. After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI found, inter alia, that the following charges against the bank were sustained, warranting imposition of monetary penalty:

The bank had:

1. sanctioned loans to its directors and their relatives;
2. breached the prudential inter-bank (gross) and counter party exposure limits; and
3. failed to upload the KYC records of accounts of certain customers onto Central KYC Records Registry within the prescribed timeline.

This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers. Further, imposition of this monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank.

2 The Reserve Bank of India (RBI) has, by an order dated December 4, 2024, imposed a monetary penalty of Rs1.00 lakh (Rupees One lakh only) on The Kulithalai Co-operative Urban Bank Ltd., Tamil Nadu (the bank) for non-compliance with specific directions issued by RBI under ‘Supervisory Action Framework (SAF)’ and certain directions issued by RBI on ‘Issue and regulation of share capital and securities - Primary (Urban) Co-operative Banks’. This penalty has been imposed in exercise of powers conferred on RBI, under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.

The statutory inspection of the bank was conducted by RBI with reference to its financial position as on March 31, 2023. Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said directions. After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI found, inter alia, that the following charges against the bank were sustained, warranting imposition of monetary penalty:

The bank had:

1. offered interest rates on deposits higher than those offered by State Bank of India, sanctioned loans beyond the eligible single borrower exposure limit and sanctioned fresh loans and advances other than loans against collateral security of term deposits, in non-adherence to directions under SAF; and
2. allowed refund of share capital to its members despite its last assessed CRAR being less than the regulatory minimum of 9%.

This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers. Further, imposition of this monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank.

3 The Reserve Bank of India (RBI) has imposed, by an order dated December 05, 2024, a monetary penalty of Rs 5.00 lakh (Rupees Five Lakh only) on Zila Sahkari Bank Ltd., Mirzapur (the bank) for contravention of provisions of Section 26A read with Section 56 of the Banking Regulation Act, 1949 (BR Act). This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the BR Act.

The statutory inspection of the bank was conducted by the National Bank for Agriculture and Rural Development (NABARD) with reference to its financial position as on March 31, 2023. Based on supervisory findings of non-compliance with statutory provisions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for contravention of provisions of the BR Act.

After considering the bank’s replies to the notice, RBI found, inter alia, that the following charge against the bank was sustained, warranting imposition of monetary penalty:

The bank had failed to transfer eligible unclaimed amounts to the Depositor Education and Awareness Fund within the prescribed time.

This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers. Further, imposition of this monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank.