Rs 50,000 To Rs 4 Lakh Fine: RBI Imposes Penalties On These Four Banks

The Reserve Bank of India (RBI) has imposed monetary penalties in the range of Rs 50,000 to a maximum of Rs 4 lakh in four banks. Majority of them were co-operative banks. They were Shree Co-operative Bank, Walchand Nagar Sahakari Bank, The Dahanu Road Janata Co-operative Bank, and Devika Urban Co-operative Bank. They were penalised due to non-compliance against the RBI's guidelines.

Here are the key highlights:

Walchand Nagar Sahakari Bank:

Based in Maharashtra, Walchand Nagar Sahakari Bank received the highest penalty of Rs 4 lakh compared to the three cooperative banks.

The penalty was due to non-compliance with certain provisions of the 'Reserve Bank of India - (Know Your Customer (KYC)) Direction, 2016.

According to RBI, the bank had failed to allot a Unique Customer Identification Code (UCIC) to individual customers and had not conducted periodic reviews of risk categorisation of accounts.

Devika Urban Co-operative Bank:

The second highest penalty of Rs 3 lakh was imposed on Devika Urban Co-operative Bank situated in Udhampur, J & K, for non-compliance with the directions issued by RBI on sanction of loans and advances to directors, relatives and firms/concerns in which they are interested.

As per RBI, the bank had renewed a cash credit facility granted to a sole proprietorship concern whose proprietor was the wife of the director's brother.

The Dahanu Road Janata Co-operative Bank:

Another Maharashtra-based lender, The Dahanu Road Janata Co-operative Bank received Rs 1 lakh monetary penalty from RBI. This was due to non-compliance with specific directions issued by RBI under the Supervisory Action Framework (SAF).

RBI highlighted that the had given donations in violation of specific directions issued under SAF.

Shree Co-operative Bank:

Lastly, the lowest penalty of Rs 50,000 was imposed on Gujarat-based Shree Co-operative Bank for non-compliance with the direction issued by RBI on 'Loans and advances to directors, relatives, firms/concerns in which they are interested'.

In the case of the bank, RBI mentioned that the lender had sanctioned a loan wherein the spouse of one of the bank's directors stood as surety/guarantor.

It needs to be noted that before issuing the penalty, RBI had issued a notice to these banks advising them to show cause as to why a penalty should not be imposed on them for failure to comply with the directions stated therein.

After considering the bank's reply to the notice and oral submissions made during the personal hearing, RBI came to the conclusion that the aforesaid charge of non-compliance with RBI direction was substantiated and warranted the imposition of monetary penalty, RBI stated.

Also, RBI said that these 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.