Reserve Bank of India imposes monetary penalty on five co-operative banks

The Reserve Bank of India (RBI) imposed monetary penalties on 5 co-operative banks for shortcomings in regulatory compliance on 19 December 2023. The co-operative banks are as follows;

1. The Manmandir Co-operative Bank Limited
2. The Lakhvad Nagarik Sahakari Bank Limited
3. Contai Co-operative Bank Limited
4. Sarvodaya Co-operative Bank Limited
5. Sanmitra Sahakari Bank Limited

The Manmandir Co-operative Bank Limited was imposed a monetary penalty of INR 3,00,000 for not adhering to the directions stipulated in “Know Your Customer (KYC) Directions, 2016” and “Maintenance of Deposit Accounts – Primary (Urban) Co-operative Banks” issued by Reserve Bank of India. The Manmandir Co-operative Bank Limited erred in ensuring the periodic maintenance of KYC for high-risk customers, as instructed by the Reserve Bank of India Directions, and failed in performing a cyclical assessment of account risk classification. The bank had fallen short to undertake an annual evaluation or audit of inactive or non-performing accounts.

The Lakhvad Nagarik Sahakari Bank Limited was imposed a monetary penalty of INR 2,00,000 for not adhering to the directions stipulated in “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)” issued by Reserve Bank of India. The Lakhvad Nagarik Sahakari Bank Limited has granted credit facility to relative of one of its directors. Also granted certain credit facilities where the relatives of its directors signed as guarantors. Subsequently, Lakhvad Nagarik Sahakari Bank Limited has breached both prudential inter-bank gross and inter-bank counterparty exposure limit.

Contai Co-operative Bank Limited was imposed a monetary penalty of INR 1,00,000 for not adhering with the directions stipulated in “Know Your Customer (KYC) Directions, 2016” issued by Reserve Bank of India. Contai Co-operative Bank Limited has erred in performing a systematic cyclical assessment of risk classification of accounts.

Sarvodaya Co-operative Bank Limited was imposed a monetary penalty of INR 1,00,000 for not adhering to certain directions stipulated under Supervisory Action Framework (SAF), issued by Reserve Bank of India. The Reserve Bank of India has uncovered that the Sarvodaya Co-operative Bank Limited has granted fresh credit facilities in violations to certain directions stipulated under Supervisory Action Framework (SAF).

Sanmitra Sahakari Bank Limited was imposed a monetary penalty of INR 1,00,000 for not adhering with the directions stipulated in “Maintenance of Deposit Accounts – Primary (Urban) Co-operative Banks” issued by Reserve Bank of India. Sanmitra Sahakari Bank Limited has levied predefined penal charges for accounts failing to maintain a minimum balance in their savings bank accounts, rather than charges commensurate to the magnitude of the failure.

These fines were assessed as a result of the Reserve Bank of India using its authority conferred by specific provisions of the Banking Regulation Act, 1949

The Reserve Bank of India went on to state that the penalties imposed on the above-mentioned cooperative banks were based on their failures and negligence to adhere with regulations and had nothing to do with the legitimacy of any agreements or transactions the banks made with their clients.