RBI Levies Monetary Penalties on 4 Co-operative Banks for Regulatory Violations

The Reserve Bank of India (RBI) has taken stringent action by imposing monetary penalties totaling Rs4.20 lakh on four co-operative banks. These banks – Vita Urban Cooperative Bank Ltd, Shri Vinayak Sahakari Bank Ltd, Shreeji Bhatia Cooperative Bank Ltd, and Mizoram Urban Cooperative Development Bank Ltd – have been found to be in breach of various regulations set forth by the central banking authority.

Penalties Allocated According to Violations

The RBI’s enforcement actions have been categorized as follows:

1. Vita Urban Cooperative Bank Ltd and Shri Vinayak Sahakari Bank Ltd: Penalty of Rs1.50 lakh each

   Vita Urban Cooperative Bank, located in Maharashtra, and Shri Vinayak Sahakari Bank of Gujarat have both been fined Rs1.50 lakh. Vita Urban Cooperative Bank’s violation pertains to its failure to transfer the requisite amount to the Depositor Education and Awareness Fund (DEAF), as well as neglecting the annual review of inoperative accounts.

2. Shreeji Bhatia Cooperative Bank Ltd: Penalty of Rs1 Lakh

   Shreeji Bhatia Cooperative Bank, also hailing from Maharashtra, faces a penalty of Rs1 lakh. This penalty stems from non-compliance with specific directives issued by the RBI, encompassing the Supervisory Action Framework (SAF) and Know Your Customer (KYC) guidelines. The bank undertook capital expenditure without the necessary RBI approval, contravening SAF directions, and neglected the periodic reassessment of risk categorization for its existing customers.

3. Mizoram Urban Cooperative Development Bank Ltd: Penalty of Rs20,000

   Mizoram Urban Cooperative Development Bank, located in Aizawl, has been fined Rs20,000. This penalty is linked to the bank’s issuance of fresh loans and advances that carried risk weights exceeding 100%, a direct violation of specific directives under the Supervisory Action Framework (SAF). Furthermore, the bank was found to lack a system for periodic reviews of risk categorization.

4. RBI’s Justification for Penalties

   The RBI, after carefully considering the responses and oral arguments presented by the banks during personal hearings, concluded that the charges of non-compliance with its directives were substantiated. Consequently, the monetary penalties were imposed as a consequence of these regulatory violations.

Insight into Violations

• Vita Urban Cooperative Bank’s Lapses: The inspection report on Vita Urban Cooperative Bank revealed the bank’s failure to allocate the appropriate amount to the Depositor Education and Awareness Fund (DEAF) and the absence of an annual review of inactive accounts, leading to a penalty of Rs1.50 lakh.

• Shri Vinayak Sahakari Bank’s Overstep: Shri Vinayak Sahakari Bank faced a penalty of Rs1.50 lakh for contravening RBI directives on the placement of deposits with other banks. The bank exceeded the prudential inter-bank (counterparty) exposure limit, as revealed by the RBI’s inspection of its financial status as of March 31, 2022.

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