The Reserve Bank of India has issued penalties to five co-operative banks for non-compliance with various regulatory directives, following inspections of their financial positions as of March 31, 2023.
These banks are Bharauch based Jambusar People’s Co-operative Bank, Surat based Rander People’s Co-operative Bank, Kheda based Mehmadabad Urban People’s Co-operative Bank, Udgir based Sahyog Urban Co-operative Bank and Meghalaya based Tura Urban Co-operative Bank.
These penalties, imposed under provisions of the Banking Regulation Act, 1949, and the Credit Information Companies (Regulation) Act, 2005, highlight RBI’s commitment to upholding regulatory standards in the cooperative banking sector.
The Jambusar People’s Co-operative Bank Ltd., based in Bharuch, Gujarat, was fined Rs 10,000 on October 28, 2024. RBI’s inspection revealed that the bank had failed to comply with requirements on ‘Membership of Credit Information Companies (CICs) by Co-operative Banks’, specifically by not submitting data to any CIC.
RBI emphasized that the penalty strictly addresses regulatory compliance and does not impact any transactions or agreements between the bank and its customers.
On the same day, RBI also imposed a penalty of Rs 1.5 lakh on The Rander People’s Co-operative Bank Ltd. in Surat, Gujarat, for contraventions under Section 26A and Section 56 of the Banking Regulation Act and failure to meet Know Your Customer (KYC) requirements. Violations included not transferring eligible funds to the Depositor Education and Awareness Fund on time and neglecting to carry out risk-based KYC updates.
RBI clarified that this penalty pertains only to compliance deficiencies and does not affect the validity of the bank’s transactions.
Mehmadabad Urban People’s Co-operative Bank Ltd. in Kheda, Gujarat, was fined Rs 60,000 after it was found to be non-compliant with both CIC membership and KYC regulations. RBI’s inspection highlighted that the bank had not submitted data to three CICs and provided incomplete data to another, in addition to failing to conduct risk-based reviews of customer accounts every six months.
This penalty focuses on regulatory compliance issues without questioning the validity of any customer transactions.
A monetary penalty of Rs 1.50 lakh has been imposed on Sahyog Urban Co-operative Bank Ltd., Udgir, Maharashtra (the bank), for contravention of the provisions of section 26A read with section 56 of the Banking Regulation Act, 1949 (BR Act).
On October 23, 2024, RBI imposed a penalty of Rs 1 lakh on Tura Urban Co-operative Bank Ltd. in Meghalaya for not following directives under the Supervisory Action Framework (SAF). The bank exceeded its capital expenditure limit and approved new loans beyond the prescribed exposure threshold without prior RBI approval.
As with the other cases, RBI specified that this penalty is based on regulatory shortcomings and is unrelated to any business transactions with the bank’s customers.
These enforcement actions underscore RBI’s commitment to maintaining stringent regulatory oversight within the cooperative banking sector, reinforcing the importance of compliance with financial regulations among all co-operative banks.