RBI Penalizes 5 Coop Banks


These actions on 5 coop banks are based on deficiencies in regulatory compliance


RBI Building

FinTech BizNews Service

Mumbai, November 30, 2023: The Reserve Bank of India (RBI) has, by separate

orders in November and October, 2023, imposed a monetary penalty on each of 5

coop banks. These actions on 5 coop banks are based on deficiencies in regulatory

compliance, as per the press releases issued by the RBI on 30 November 2023.

RBI has imposed monetary penalty on Patliputra Central Cooperative Bank, Bihar;

Balasore Bhadrak Central Co-operative Bank; Dhrangadhra People’s Co-operative

Bank., Dist. Surendranagar, Gujarat; Patan Nagarik Sahakari Bank Ltd., Patan,

Gujarat and Mandal Nagarik Sahakari Bank Ltd., Mandal, Dist. Ahmedabad, Gujarat.

1 The Reserve Bank of India (RBI) has, by an order dated November 13, 2023,

imposed a monetary penalty of ?1.50 lakh (Rupees One lakh and fifty thousand only)

on The Patliputra Central Cooperative Bank Ltd, Bihar (the bank) for non-compliance

with the directions issued by RBI on ‘The Depositor Education and Awareness Fund

Scheme, 2014 – Section 26A of Banking Regulation Act, 1949 - Operational

Guidelines’ and ‘Reserve Bank of India – (Know Your Customer (KYC)) Directions,

2016’. This penalty has been imposed in exercise of powers conferred on RBI under

the provisions of Section 47-A (1) (c) read with Sections 46 (4) (i) and 56 of the

Banking Regulation Act, 1949.

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.

Background

The statutory inspection of the bank conducted by the National Bank for Agriculture

and Rural Development (NABARD) with reference to its financial position as on

March 31, 2022, and examination of the Inspection Report and all correspondence

related thereto revealed, inter alia, that the bank had (i) not transferred eligible

amounts to the Depositor Education and Awareness Fund, (ii) not classified its

customers into various risk categories (low, medium and high), and (iii) not put in

place a system of periodic updation of KYC. Consequently, a notice was issued to

the bank advising it to show cause as to why penalty should not be imposed on it for

non-compliance with the said directions, as stated therein.

After considering the bank’s reply to the notice and additional submissions, RBI

came to the conclusion that the aforementioned charge of non-compliance with the

RBI directions was substantiated and warranted imposition of monetary penalty on

the bank.

2 The Reserve Bank of India (RBI) has, by an order dated November 07, 2023,

imposed a monetary penalty of ?50,000/- (Rupees Fifty thousand only) on The

Balasore Bhadrak Central Co-operative Bank Ltd., Balasore (the bank) for non-

compliance with the directions issued by RBI on “Membership of Credit Information

Companies (CICs)”. This penalty has been imposed in exercise of powers conferred

on RBI under the provisions of section 25 (1) (iii) read with section 23 (4) of the

Credit Information Companies (Regulation) Act, 2005.

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.

Background

The statutory inspection of the bank conducted by the National Bank for Agriculture

and Rural Development (NABARD) with reference to its financial position as on

March 31, 2022, and examination of the Inspection Report and all correspondence

related thereto revealed, inter alia, that the bank had failed to upload credit

information to Credit Information Companies. Consequently, a notice was issued to

the bank advising it to show cause as to why penalty should not be imposed on it for

non-compliance with the aforementioned direction, as stated therein.

After considering the bank’s reply to the notice, additional submissions and oral

submissions made by it during the personal hearing, RBI came to the conclusion that

the charge of non-compliance with the aforesaid RBI direction was substantiated and

warranted imposition of monetary penalty on the bank.

3 The Reserve Bank of India (RBI) has, by an order dated November 03, 2023,

imposed a monetary penalty of ?1.00 lakh (Rupees One lakh only) on The

Dhrangadhra People’s Co-operative Bank Ltd., Dhrangadhra, Dist. Surendranagar,

Gujarat (the bank) for non-compliance with the directions issued by RBI on

‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks

(UCBs)’. This penalty has been imposed in exercise of powers conferred on RBI

under the provisions of Section 47-A (1) (c) read with Sections 46 (4) (i) and 56 of

the Banking Regulation Act, 1949.

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.

Background

The statutory inspection of the bank conducted by RBI with reference to its financial

position as on March 31, 2022, and examination of the Inspection Report, Risk

Assessment Report and all correspondence related thereto revealed, inter alia, that

the bank had breached the inter-bank counterparty exposure limit. Consequently, a

notice was issued to the bank advising it to show cause as to why penalty should

not be imposed on it for failure to comply with the said directions, as stated therein.

After considering the bank’s reply to the notice and oral submissions made by it

during the personal hearing, RBI came to the conclusion that the charge of non-

compliance with the aforesaid RBI directions was substantiated and warranted

imposition of monetary penalty on the bank.

4 The Reserve Bank of India (RBI) has, by an order dated October 30, 2023,

imposed a monetary penalty of ?1.50 lakh (Rupees One lakh fifty thousand only) on

Patan Nagarik Sahakari Bank Ltd., Patan, Gujarat (the bank) for non-compliance

with the directions issued by RBI on ‘Loans and advances to directors, relatives

and firms/concerns in which they are Interested’ read with ‘Loans and Advances to

directors etc. - directors as surety/guarantors – Clarification’ and ‘Placement of

Deposits with Other Banks by Primary (Urban) Co-operative Banks (UCBs)’. This

penalty has been imposed in exercise of powers conferred on RBI under the

provisions of Section 47-A (1) (c) read with Sections 46 (4) (i) and 56 of the

Banking Regulation Act, 1949.

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.

Background

The statutory inspection of the bank conducted by RBI with reference to its financial

position as on March 31, 2022, and examination of the Inspection Report, Risk

Assessment Report and all correspondence related thereto revealed, inter alia, that

the bank had (i) sanctioned a loan where a relative of one of the directors of the

bank stood as guarantor; and (ii) breached the prudential inter-bank counterparty

exposure limit. Consequently, a notice was issued to the bank advising it to show

cause as to why penalty should not be imposed on it for failure to comply with the

said directions, as stated therein.

After considering the bank’s reply to the notice and oral submissions made by it

during the personal hearing, RBI came to the conclusion that the charge of non-

compliance with the aforesaid RBI directions was substantiated and warranted

imposition of monetary penalty on the bank.

5 The Reserve Bank of India (RBI) has, by an order dated November 03, 2023,

imposed a monetary penalty of ?1.50 Lakh (Rupees One lakh fifty thousand only)

on The Mandal Nagarik Sahakari Bank Ltd., Mandal, Dist. Ahmedabad, Gujarat

(the bank) for non-compliance with the directions issued by RBI on ‘Loans and

advances to directors, relatives and firms/concerns in which they are interested’

read with ‘Loans and Advances to Directors etc. - Directors as surety/guarantors –

Clarification’ and ‘Co-operative Banks - Interest Rate on Deposits’. This penalty has

been imposed in exercise of powers conferred on RBI under the provisions of

Section 47-A (1) (c) read with Sections 46 (4) (i) and 56 of the Banking Regulation

Act, 1949.

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.

Background

The statutory inspection of the bank conducted by RBI with reference to its financial

position as on March 31, 2022, and examination of the Inspection Report, Risk

Assessment Report and all correspondence related thereto, revealed, inter alia,

that the bank had (i) sanctioned loans where a relative of one of the director of the

bank stood as guarantor; and (ii) not paid interest at the applicable rate a) on term

deposits which matured on a Sunday / holiday / non-business working day, and

were paid on the succeeding working days, b) on deposits withdrawn before their

maturity for the period deposits remained with the bank and c) on matured overdue

term deposits from the date of maturity till the date of their repayment.

Consequently, a notice was issued to the bank advising it to show cause as to why

penalty should not be imposed on it for failure to comply with the said directions, as

stated therein.

After considering the bank’s reply to the notice and oral submissions made by it

during the personal hearing, RBI came to the conclusion that the charge of non-

compliance with the aforesaid RBI directions was substantiated and warranted

imposition of monetary penalty on the bank.

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