Regulatory Action: RBI Penalizes 4 Co-operative Banks, Cancels License of 1
Regulatory Action: RBI Penalizes 4 Co-operative Banks, Cancels License of 1
The Reserve Bank of India (RBI) has taken decisive action against five co-operative banks for various regulatory violations. While four banks received monetary penalties, the license of one bank has been cancelled.
Four co-ops have been hit with financial fines by the Reserve Bank of India (RBI) for noncompliance with regulations. The Prathamik Shikshak Sahakari Bank Ltd., Patan Co-operative Bank Ltd., Rajarshi Shahu Sahakari Bank Ltd., and The District Co-operative Central Bank Ltd. are these co-ops. A cooperative bank’s license was also revoked by the apex bank due to insufficient capital and earnings potential.
Rajarshi Shahu Sahakari Bank Ltd., Pune, Maharashtra, was fined ₹1.00 lakh by the Reserve Bank for failing to follow their guidelines on “Maintenance of Deposit Accounts – Primary (Urban) Co-operative Banks.” According to the RBI, the Rajarshi Shahu Sahakari Bank failed to notify its customers of the shortfall in minimum balance before levying charges, and instead of imposing penal charges commensurate with the amount of the shortfall, the bank imposed fixed penalties for failure to maintain the minimum balance in savings bank accounts.
The Prathamik Shikshak Sahakari Bank Limited, Satara, Maharashtra, was fined ₹1.00 lakh by the banking regulator for failing to follow the RBI’s guidelines on the “Management of Advances-UCBs.” According to the banking authority, the Prathamik Shikshak Sahakari Bank approved gold loans under the bullet repayment plan that exceeded the regulatory limit.
Patan Co-operative Bank Limited, Mumbai, Maharashtra, was fined ₹1.00 lakh by the Reserve Bank of India for failing to follow the RBI’s “Reserve Bank of India – Know Your Customer (KYC) Direction, 2016.” The RBI said that the Patan Co-operative Bank had neglected to conduct a routine evaluation of the risk classification of its accounts.
The District Co-operative Central Bank Ltd., Mahabubnagar, Telangana, was fined ₹10,000 by the RBI for failing to follow the guidelines provided by the National Bank for Agricultural and Rural Development (NABARD) regarding the “Review of Frauds – Guidelines on Monitoring and Reporting System” and the “Frauds – Guidelines for Classification, Reporting and Monitoring of Frauds.” According to the banking authority, the District Co-operative Central Bank failed to disclose fraud incidents to NABARD within the allotted period.
The Reserve Bank did not seek to rule on the legality of any transaction or arrangement that the banks or NBFC had with its clients; rather, its actions were motivated by shortcomings in regulatory compliance.
In a related development, the Reserve Bank of India on Thursday revoked the license of Urban Co-operative Bank Ltd., Uttar Pradesh, which is headquartered in Sitapur, and instructed the bank to cease all banking operations as of December 7, 2023, at the latest.
With immediate effect, the Reserve Bank said that “Urban Co-operative Bank Limited, Sitapur, Uttar Pradesh” is forbidden from engaging in the “banking” business, which includes, among other things, the acceptance and repayment of deposits as defined in Section 5(b) read with Section 56 of the Banking Regulation Act, 1949.
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The Urban Co-operative Bank Sitapur lacks sufficient capital and earning potential, according to the apex bank. As a result, it violates the Banking Regulation Act of 1949’s Sections 11(1) and 22(3)(d) as well as Section 56.
Additionally, the co-operative bank was found to have violated some provisions of the 1949 Banking Regulation Act, according to the banking regulator.
The Reserve Bank went on to state that allowing the Urban Co-operative Bank Sitapur to continue operating would be detrimental to the public interest because the bank, given its current financial situation, would not be able to fully compensate its current depositors.
According to the RBI, upon liquidation, each depositor would be eligible to receive, according to the terms of the DICGC Act, 1961, the whole amount of their deposits, up to a maximum of ₹5,00,000, from the Deposit Insurance and Credit Guarantee Corporation (DICGC). Based on information provided by the bank, 98.32% of depositors are eligible to get their entire deposit back from DICGC.
The Commissioner and Registrar of Cooperative, Uttar Pradesh, has been instructed by the RBI to issue an order for the bank’s winding up and the appointment of a liquidator. Go through
