RBI Takes Stringent Action Against Co-operative Banks and NBFC for Regulatory Lapses

RBI Takes Stringent Action Against Co-operative Banks and NBFC for Regulatory Lapses

The Reserve Bank of India (RBI) has imposed monetary penalties on four cooperative banks and a non-banking financial company (NBFC) for deficiencies in regulatory compliance. The co-operative banks are Nasik Merchant’s Co-operative Bank Ltd, Mehsana Urban Co-operative Bank Ltd, Sangli Sahakari Bank Ltd, Pudukkottai Co-operative Town Bank Ltd and the NBFC Sappers Finance and Consultancy Private Ltd.

The Reserve Bank of India (RBI) has levied monetary penalties on four cooperative banks and one non-banking financial company (NBFC) for failing to adhere to regulatory requirements.

One of the four cooperative banks penalised is The Nasik Merchant's Co-operative Bank Ltd., Nashik. The RBI imposed a monetary penalty of ₹48.30 lakh on it for failing to comply with RBI directives regarding 'Frauds in UCBs: Changes in Monitoring and Reporting mechanism' and 'Maintenance of Deposit Accounts'. The banking regulator stated that Nasik Merchant's Co-operative Bank had delayed reporting fraud cases and levied charges for non-maintenance of minimum balances in dormant or inoperative savings bank (SB) accounts without notifying customers.

The RBI imposed a monetary penalty of ₹15 lakh on the Mehsana Urban Co-operative Bank Ltd., Mehsana for failing to adhere to its directives regarding 'Interest Rate on Deposits'. The Reserve Bank noted that the Mehsana Urban Co-operative Bank had opened Savings Bank accounts for ineligible trusts whose entire income was not exempt from income tax under the Income-tax Act, 1961.

The Sangli Sahakari Bank Limited (Mumbai) incurred a monetary penalty of ₹2 lakh imposed by the RBI for failing to comply with its directives regarding 'Board of Directors-UCBs'. The banking regulator stated that the Sangli Sahakari Bank Limited had renewed a loan granted to a relative of one of its directors.

The RBI imposed a monetary penalty of ₹25,000 on the Pudukkottai Co-operative Town Bank Ltd., Pudukkottai, Tamil Nadu for violating its directives regarding 'Board of Directors - UCBs'. The apex bank stated that the Pudukkottai Co-operative Town Bank Ltd had extended loans to its directors, contravening established banking regulations.

The sole NBFC facing RBI's penalty is Sappers Finance and Consultancy Pvt Ltd., Kolkata. The RBI imposed a monetary penalty of ₹1.50 lakh on the NBFC for failing to adhere to its directives on various grounds, including the requirement to obtain prior RBI approval in cases of acquisition/transfer of control of Non-Banking Financial Companies (NBFCs); and the Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016, read in conjunction with RBI directives on the 'Format of Statutory Auditors' Certificate (SAC) to be submitted by NBFCs'.

The Reserve Bank stated that the NBFC had not only neglected to obtain prior approval for its management change but also failed to submit the required returns and statutory auditor's certificate to it.

The RBI has clarified that these actions were taken in response to regulatory compliance shortcomings and do not imply any judgment on the validity of transactions or agreements entered into by the affected banks or NBFC with their customers.