RBI imposes monetary penalty on four co-operative banks and one HFC. Details here

The Reserve Bank has imposed monetary penalties on four co-operative banks for deficiencies in regulatory compliance. These co-operative banks are: Gujarat Mercantile Co-operative Bank Ltd, Nagarik Sahakari Bank Ltd, Makarpura Industrial Estate Co-operative Bank Ltd and The Sevalia Urban Co-operative Bank Ltd.

The Reserve Bank has imposed a monetary penalty of ₹4.50 lakh on Gujarat Mercantile Co-operative Bank Ltd., Ahmedabad, Gujarat for non-compliance with the directions issued by RBI on ‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (UCBs)’ and ‘Maintenance of Cash Reserve Ratio (CRR)’. 

The Gujarat Mercantile Co-operative Bank had not only breached the prudential inter-bank gross exposure limit, but also breached the prudential inter-bank counterparty exposure limit, and not maintained the minimum Cash Reserve Ratio (CRR) for certain days, the Reserve Bank said.

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The RBI imposed a monetary penalty of ₹2.00 lakh on Nagarik Sahakari Bank Ltd., Babra, Gujarat for contravention of certain sections of the Banking Regulation Act, 1949 (BR Act) and RBI directions on ‘Loans and advances to directors, relatives, firms/concerns in which they are interested’, ‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (UCBs)’ and ‘Co-operative Banks - Interest Rate on Deposits’.

The bank had not transferred eligible amount to Depositor Education and Awareness Fund, (ii) had sanctioned a credit facility to an individual where relative of one of the bank’s directors stood as guarantor, (iii) had breached the prudential inter-bank gross exposure limit, (iv) had breached the prudential inter-bank counterparty exposure limit, and (v) had not paid interest on matured unpaid term deposits for the period they remained unclaimed with the bank, the banking regulator said in its circular.

The Reserve Bank imposed a monetary penalty of ₹2.00 lakh on Makarpura Industrial Estate Co-operative Bank Ltd., Dist. Vadodara, Gujarat for contravention of Section 26A (2) of the Banking Regulation Act, 1949 (BR Act) and RBI directions on ‘Loans and advances to directors, relatives, firms/concerns in which they are interested.’

The apex bank said the Makarpura Industrial Estate Co-operative Bank had not transferred the eligible amount to the Depositor Education and Awareness Fund, and had sanctioned a loan wherein a relative of the director of the bank stood as guarantor. 

The RBI imposed a monetary penalty of ₹50,000 on The Sevalia Urban Co-operative Bank Ltd., Sevalia, dist. Kheda, Gujarat for non-compliance of 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 or guarantors – Clarification’. The bank had sanctioned a loan, wherein a relative of one of the bank’s directors stood as surety or guarantor.

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 with its customers.

Separately, the Reserve Bank imposed a monetary penalty of ₹1.70 lakh on West End Housing Finance Limited for non-compliance with National Housing Bank (NHB) directions on ‘Housing Finance Companies – Approval of Acquisition or Transfer of Control (NHB) Directions 2016’ and RBI direction on ‘Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021’.

The company’s failure to obtain prior written permission of NHB or RBI for change in its shareholding due to progressive increases over time, resulting in the transfer of shareholding beyond the permitted limit, the Reserve Bank said.