RBI Imposes Monetary Penalty On Four Cooperative Banks; Cancels Licence Of Another Bank

RBI Imposes Monetary Penalty On Four Cooperative Banks; Cancels Licence Of Another Bank

These are from Maharashtra, Telangana, and Uttar Pradesh

The Reserve Bank of India (RBI) has imposed monetary penalties on four cooperative banks for deficiencies in regulatory compliance.

The four co-operative banks are Rajarshi Shahu Sahakari Bank, Pune, Maharashtra, Prathamik Shikshak Sahakari Bank, Satara, Maharashtra, Patan Cooperative Bank, Mumbai, Maharashtra, and District Cooperative Central Bank, Mahabubnagar, Telangana.

A monetary penalty of Rs.1 lakh was imposed on Rajarshi Shahu Bank for non-compliance with the directions of the RBI on ‘Maintenance of Deposit Accounts - Primary (Urban) Cooperative Banks’. The bank had imposed fixed penal charges for the shortfall in the maintenance of minimum balance in savings bank accounts, instead of imposing charges proportionate to the extent of shortfall. However, it failed to notify its customers about the shortfall in minimum balance before levying the charges.

It imposed a monetary penalty of Rs.1 lakh on Prathamik Shikshak Bank for non-compliance on ‘Management of Advances-UCBs’. The bank had sanctioned gold loans beyond the prescribed regulatory limit under the bullet repayment scheme.

A monetary penalty of Rs.1 lakh was levied on Patan Cooperative Bank for non-compliance with directions on ‘Reserve Bank of India – Know Your Customer (KYC) Direction, 2016’. The bank failed to carry out periodic reviews of risk categorization of accounts.

The District Cooperative bank was slapped with a Rs.10,000 fine for non-compliance with the directions issued by the National Bank for Agriculture and Rural Development (NABARD) on ‘Review of Frauds – Guidelines on Monitoring and Reporting System’ read with ‘Frauds - Guidelines for Classification, Reporting, and Monitoring of Frauds’. The bank did not report the cases of fraud to NABARD within the stipulated timeline.

The RBI’s actions were based on deficiencies in regulatory compliance and not intended to pronounce the validity of any transaction or agreement entered by the banks or NBFC with its customers.

The banking regulator also canceled the licence of Urban Co-operative Bank, Sitapur, Uttar Pradesh, as it did not have adequate capital and earning prospects. It directed the bank not to carry on any banking business, with effect from the close of business on 7 December 2023.

The RBI stated, “The bank is prohibited from conducting the business of ‘banking’, which includes, acceptance of deposits and repayment of deposits as defined in Section 5(b) read with Section 56 of the Banking Regulation Act, 1949 with immediate effect.”

It added that the public interest would be adversely affected if the bank was allowed to carry on its business any further because, in its present financial position, it would be unable to pay its present depositors in full.

On the aspect of liquidation, the RBI said that every depositor would be entitled to receive the deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs.5,00,000 from the Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of the DICGC Act, 1961.

As per the data submitted by the bank, 98.32 percent of depositors were entitled to receive the full amount of their deposits.

The RBI directed the Commissioner and Registrar of Cooperative, Uttar Pradesh, to issue an order for winding up the bank and appoint a liquidator.