The Reserve Bank of India (RBI) has imposed monetary penalties on five co-operative banks for non-compliance with various directions issued by the central bank. The banks that have been penalised are G P Parsik Sahakari Bank Ltd., Thane, Adinath Co-operative Bank Limited, Surat, Janseva Co-operative Bank Limited, Nashik, Transport Co-operative Bank Ltd., Indore, and Hanamasagar Urban Co-operative Bank Ltd., Hanamasagar. The penalties range from Rs 50,000 to Rs 26.60 lakh, depending on the nature and the severity of the violations.
The RBI has stated that the penalties have been imposed in exercise of its powers under the provisions of section 47A (1) © read with sections 46 (4) (i) and 56 of the Banking Regulation Act, 1949. The penalties are based on deficiencies in regulatory compliance and are not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers.
The reasons for the penalties are as follows:
- G P Parsik Sahakari Bank Ltd. has been fined Rs 26.60 lakh for non-compliance with the directions issued by RBI on ‘Customer Protection – Limiting Liability of Customers of Co-operative Banks in Unauthorised Electronic Banking Transactions’ and on ‘Basic Savings Bank Deposit Account’ (BSBD Account).
- Adinath Co-operative Bank Limited has been fined Rs 1.50 lakh for non-compliance with the directions issued by RBI on ‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (UCBs)’.
- Janseva Co-operative Bank Limited has been fined Rs 50,000 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’.
- Transport Co-operative Bank Ltd. has been fined Rs 1.00 lakh 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 on ‘Investments by Primary (Urban) Co-operative Banks’.
- Hanamasagar Urban Co-operative Bank Ltd. has been fined Rs 50,000 for non-compliance with the directions issued by RBI on “Frauds in UCBs: Changes in Monitoring and Reporting mechanism” read with the directions issued by RBI on “Master Circular on Frauds-Classification and Reporting” and “Reporting of Frauds on XBRL-FMR submission, FMR 2 discontinuation and introduction of FMR-3”.
The Implications of the Penalties
The penalties imposed by RBI on the five co-operative banks have several implications, such as:
- The penalties reflect the strict and proactive stance of RBI in enforcing the regulatory norms and standards for the co-operative banking sector, which is vital for ensuring the stability and the integrity of the financial system.
- The penalties serve as a deterrent and a warning for the other co-operative banks to comply with the RBI directions and to avoid any lapses or violations that may compromise the interests and the rights of the customers and the stakeholders.
- The penalties also highlight the need for the co-operative banks to improve their governance and their management, and to adopt best practices and systems that can prevent and detect any irregularities or frauds in their operations.
