Mumbai: On Monday, RBI issued a press release in which a monetary penalty was imposed on four Gujarat-based co-operative Banks “Nagarik Shahakari Bank”, “Sevalia Urban Co-operative Bank”, “Makarpura Industrial Estate Co-operative Bank” and “Gujarat Mercantile Co-operative Bank”.

The background of the monetary penalty was non-compliance with important RBI directions and Contravention of Banking regulations. The penalty was imposed according to the Reserve Bank of India Act, 1934 provisions.

According to the RBI, penalties were imposed on four Co-operative banks on the below mentioned grounds:

#1. Nagarik Shahakari Bank

A. Penalty Amount:  Rupees two lakh monetary penalty  

B. Ground of Penalty:

1. Contravention of Banking Regulations
2. Failed to transfer the eligible amount to DEA Fund
3. Sanctioned a credit facility to an individual where a relative of one of the bank directors stood as guarantor
4. Breach the prudential inter-bank gross exposure and counterparty limit
5. Failed to pay interest on matured unpaid term deposit.

#2. Sevalia Urban Co-operative Bank

A. Penalty Amount: Rupees fifty thousand monetary penalty  

B. Ground of Penalty:

1. Sanctioned a loan to an individual where a relative of one of the bank directors stood as guarantor.

#3. Makarpura Industrial Estate Co-operative Bank

A. Penalty Amount: Rupees two lakh monetary penalty  

B. Ground of Penalty:

1. Contravention of Banking Regulations
2. Sanctioned a loan to an individual where a relative of one of the bank directors stood as guarantor.
3. Failed to transfer the eligible amount to DEA Fund

#4. Gujarat Mercantile Co-operative Bank

A. Penalty Amount: RBI imposed rupees 4.50 lakh monetary penalty  

B. Ground of Penalty:

1. Breach the prudential inter-bank gross exposure and counterparty limit
2. Failed to maintain minimum cash reserve ratio for certain days.

The above non-compliance was revealed when RBI conducted a statutory inspection of the Banks with reference to their financial position the previous year and thereafter issued a show-cause notice to them, at last RBI came to the conclusion that the charge of non-compliance with RBI directions was substantiated and warranted imposition of monetary penalty and passed order for imposed the monetary penalties.

This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction entered into by the company with its customers: RBI said in a statement.

Co-operative banks are expected to adhere to the regulations and directions set forth by the RBI to ensure the banking system’s smooth functioning and protect customers’ interests.

For a comprehensive understanding of the RBI’s action, it is advisable to refer to the official website of RBI.