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Business News/ Industry / Banking/  RBI imposes monetary penalty on four co-operative banks, cancels licence of another. Details here
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RBI imposes monetary penalty on four co-operative banks, cancels licence of another. Details here

The RBI imposed monetary penalties on four co-operative banks for deficiencies in regulatory compliance. These co-operative banks are: Rajarshi Shahu Sahakari Bank, The Prathamik Shikshak Sahakari Bank, Patan Co-operative Bank, and The District Co-operative Central Bank

The Reserve Bank also cancelled the licence of Sitapur-based Urban Co-operative Bank Ltd and asked the bank not to carry on any banking business with immediate effect (Photo: Mint)Premium
The Reserve Bank also cancelled the licence of Sitapur-based Urban Co-operative Bank Ltd and asked the bank not to carry on any banking business with immediate effect (Photo: Mint)

The Reserve Bank of India (RBI) has imposed monetary penalties on four co-operative banks for deficiencies in regulatory compliance. These co-operative banks are: Rajarshi Shahu Sahakari Bank Ltd, The Prathamik Shikshak Sahakari Bank Ltd, Patan Co-operative Bank Ltd, and The District Co-operative Central Bank Ltd. The apex bank also cancelled the licence of a co-operative bank, as the bank does not have adequate capital and earning prospects. 

The Reserve Bank imposed a monetary penalty of 1.00 lakh on Rajarshi Shahu Sahakari Bank Ltd., Pune, Maharashtra for non-compliance with the directions issued by RBI on ‘Maintenance of Deposit Accounts - Primary (Urban) Co-operative Banks’. The RBI said the Rajarshi Shahu Sahakari Bank had imposed fixed penal charges for shortfall in maintenance of minimum balance in savings bank accounts, instead of imposing penal charges proportionate to the extent of shortfall, and had also failed to notify its customers about the shortfall in minimum balance before levying charges.

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The banking regulator imposed a monetary penalty of 1.00 lakh on The Prathamik Shikshak Sahakari Bank Limited, Satara, Maharashtra for non-compliance with the directions issued by RBI on ‘Management of Advances-UCBs’. The banking regulator said the Prathamik Shikshak Sahakari Bank had sanctioned gold loans beyond prescribed regulatory limit under bullet repayment scheme.

The Reserve Bank imposed a monetary penalty of 1.00 lakh on Patan Co-operative Bank Limited, Mumbai, Maharashtra for non-compliance with directions issued by RBI on ‘Reserve Bank of India –Know Your Customer (KYC) Direction, 2016’. The Patan Co-operative Bank had failed to carry out periodic review of risk categorisation of accounts, the RBI said.

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The RBI imposed a monetary penalty of 10,000 on The District Co-operative Central Bank Ltd., Mahabubnagar, Telangana 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 District Co-operative Central Bank had not reported cases of fraud to NABARD within the stipulated timeline, the banking regulator said.

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

Also Read | RBI mulls new penalty framework for banks: Report

Separately, the Reserve Bank Thursday cancelled the licence of Sitapur-based Urban Co-operative Bank Ltd, Uttar Pradesh and asked the bank not to carry on any banking business, with effect from the close of business on December 7, 2023.

“Urban Co-operative Bank Limited, Sitapur, Uttar Pradesh" is prohibited from conducting the business of ‘banking’ which includes, among other things, 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, the Reserve Bank said.

The apex bank said the Urban Co-operative Bank Sitapur, does not have adequate capital and earning prospects. As such, it does not comply with the provisions of Section 11(1) and Section 22 (3) (d) read with Section 56 of the Banking Regulation Act, 1949.

Also Read | RBI's floating rate savings bonds: Why should investors invest in them?

The banking regulator also said the co-operative bank has failed to comply with certain sections of the Banking Regulation Act, 1949.

The Reserve Bank further said the public interest would be adversely affected if the Urban Co-operative Bank Sitapur is allowed to carry on its banking business any further as the bank with its present financial position would be unable to pay its present depositors in full.

On liquidation, the RBI said that every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of 5,00,000 from Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of DICGC Act, 1961. As per the data submitted by the bank, 98.32% of the depositors are entitled to receive full amount of their deposits from DICGC.

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

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Published: 07 Dec 2023, 07:01 PM IST
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