RBI Fines Monetary Penalty On These Two Co-operative Banks

The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs 3.00 lakh (Rupees three lakh only) on The Sutex Co-operative Bank Ltd., Surat (Gujarat) for violating guidelines specified on 'Loans and advances to directors, relatives and firms /concerns in which they are interested' and 'Loans and advances to directors etc. - directors as surety/guarantors - Clarification'. According to the official statement "This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949, taking into account the failure of the bank to adhere to the aforesaid directions issued by RBI."

As per the statement issued on 7th September 2021 "The statutory inspection of the bank conducted by the RBI with reference to the bank's financial position as on March 31, 2018, the Inspection Report pertaining thereto and examination of all related correspondence revealed, inter alia, non-compliance with aforesaid directions issued by the RBI. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for non-compliance with the aforesaid directions issued by the RBI. After considering the bank's reply to the notice and oral submissions made during the personal hearing, the RBI came to the conclusion that the aforesaid charge was substantiated and warranted imposition of monetary penalty."

As of 6th September 2021, RBI has also fined a monetary penalty of Rs 2.00 lakh (Rupees two lakh only) on Sarvodaya Co-operative Bank Ltd., Bhandup (W), Mumbai. This penalty has been imposed in exercise of authorities conferred in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) I and Section 56 of the Banking Regulation Act, 1949, taking into consideration the bank's failure to comply to the non-compliance with directions issued by RBI.

According to the official statement "The inspection report of the bank based on its financial position as on March 31, 2019, revealed, inter alia, that the bank had not put in place the system of periodic review of risk categorization of accounts. Based on the same, a Notice was issued to the bank advising it to show cause as to why penalty should not be imposed for non-compliance with the aforesaid directions. After considering the bank's reply to the Notice, RBI came to the conclusion that the aforesaid charge of non-compliance with RBI directions was substantiated and warranted imposition of monetary penalty."

The above said action on both co-operative banks 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, RBI clarified.