The Reserve Bank of India (RBI) recently imposed penalties of ₹5 Lakh each on The Panchkula Central Co-operative Bank Ltd., Haryana, and The Patiala Central Co-operative Bank Ltd., Punjab, for violating provisions of the Banking Regulation Act, 1949. The penalties highlight critical compliance issues in transferring eligible unclaimed amounts to the Depositor Education and Awareness Fund (DEAF) within the prescribed timeframe.
Key Points:
- The Issue
- Both banks failed to transfer unclaimed deposits to DEAF, a fund established to protect depositor interests.
- Inspections by NABARD (National Bank for Agriculture and Rural Development) revealed non-compliance as of March 31, 2023.
- RBI’s Action
- Penalties were levied under Sections 26A, 46, and 47A of the Banking Regulation Act.
- This followed show-cause notices, bank responses, and hearings.
- Objective of DEAF
- DEAF ensures unclaimed amounts (e.g., dormant accounts) are utilized for depositors’ benefit while remaining accessible to rightful claimants.
Takeaways for Other Banks
- Prioritize Compliance
Regulatory adherence isn’t optional. Banks must ensure timely transfer of funds and compliance with statutory obligations. - Strengthen Governance
Robust monitoring mechanisms can prevent regulatory lapses and safeguard depositor interests. - Regular Audits
Conduct frequent audits to identify and address compliance gaps before they escalate. - Awareness and Training
Equip staff with updated knowledge on regulations like DEAF to avoid unintentional violations. - Transparency
Maintain open communication with regulators and timely reporting to build trust.
Final Thoughts
RBI’s action emphasizes its commitment to enforcing financial discipline across banking institutions. For other banks, this serves as a wake-up call to fortify their regulatory frameworks and foster trust in the banking system. Compliance is not merely about avoiding penalties but about protecting customer interests and enhancing institutional integrity.
