The Reserve Bank of India (RBI) has recently imposed monetary penalties on four co-operative banks due to their failure to comply with regulatory guidelines. This step reflects the RBI’s dedication to maintaining discipline in the banking sector and ensuring adherence to its directives. Here are the details of the actions taken:
1. The Bharat Co-operative Bank Ltd., Bengaluru
- Penalty: ₹3,00,000 (Rupees Three Lakh)
- Reason: Violation of the ‘Supervisory Action Framework (SAF).’
- Issues Identified:
- Extending loans beyond the specified single borrower exposure limit.
- Failing to secure loans with adequate collateral like term deposits, NSCs, KVPs, or insurance policies.
- Context: Following an inspection as of March 31, 2023, and subsequent analysis, these irregularities came to light.
2. Swami Vivekanand Sahakari Bank Niyamit, Nidagundi, Karnataka
- Penalty: ₹1,00,000 (Rupees One Lakh)
- Reason: Non-compliance with norms on exposure limits and KYC requirements.
- Issues Identified:
- Breaching prudential limits for inter-bank and counterparty exposures.
- Delayed submission of customer KYC details to the Central KYC Records Registry (CKYCR).
3. Sri Basaveshwara Pattana Sahakara Bank Niyamit, Sindgi, Karnataka
- Penalty: ₹1,00,000 (Rupees One Lakh)
- Reason: Violations under the ‘Supervisory Action Framework (SAF).’
- Issues Identified:
- Increasing exposure to high-NPA sectors.
- Declaring dividends without prior RBI approval.
4. Manjra Mahila Urban Co-operative Bank Limited, Bidar, Karnataka
- Penalty: ₹50,000 (Rupees Fifty Thousand)
- Reason: Non-compliance with KYC regulations.
- Issue Identified:
- Failure to upload customer KYC records to the CKYCR on time.
Key Insights
- Regulatory Vigilance: The RBI’s supervisory framework ensures financial institutions operate within set parameters, promoting accountability.
- KYC Adherence: Keeping accurate and timely KYC records is essential for operational transparency and risk mitigation.
- Compliance with Exposure Norms: Staying within prescribed limits for loans and investments helps maintain financial health.
- Preventive Measures: These penalties serve as a reminder for banks to proactively address compliance gaps to avoid punitive actions.
Final Thoughts
These penalties serve as a reminder to all financial institutions of the importance of complying with regulatory norms. While punitive in nature, these measures aim to promote better governance and operational discipline in the banking sector. Compliance is not just a legal obligation but a critical component for sustaining trust and growth in the financial ecosystem.
