The Reserve Bank of India (RBI) has recently imposed a monetary penalty of Rs 2 lakh on The Halol Urban Co-operative Bank Ltd., located in Panchmahal, Gujarat.
The penalty is a result of the bank’s non-compliance with various directives issued by the RBI, including those pertaining to ‘Loans and Advances to directors, relatives, and firms/concerns in which they are interested,’ ‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (UCBs),’ and ‘(Co-operative Banks – Interest Rate on Deposits) Directions, 2016.’ The penalty, amounting to Rupees Two lakh, has been enforced under the powers granted to the RBI by Section 47A(1)(c), along with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
The regulatory action taken by the RBI is rooted in identified deficiencies in the bank’s adherence to regulatory compliance, and it is crucial to note that the penalty does not cast any judgment on the validity of specific transactions or agreements entered into by the bank with its customers.
The background of this penalty includes a comprehensive statutory inspection of The Halol Urban Co-operative Bank conducted by the RBI concerning its financial position as of March 31, 2022.
The examination involved a meticulous review of the Inspection Report, Risk Assessment Report, and related correspondence. The findings revealed significant irregularities, such as the sanctioning of a loan where a relative of one of the bank’s directors served as a guarantor.
Additionally, the bank was found to have breached prudential inter-bank counterparty exposure limits and neglected to pay interest on matured term deposits from the date of maturity until their repayment at the applicable rate.
Consequently, the RBI issued a notice to The Halol Urban Co-operative Bank, calling upon it to show cause as to why a penalty should not be imposed for its failure to comply with the aforementioned directives.
The bank responded to the notice, presenting its case during the personal hearing conducted by the RBI.
After due consideration of the bank’s reply and oral submissions, the RBI concluded that the charges of non-compliance with the specified directives were substantiated.
As a result, the monetary penalty of Rs 2.00 lakh was deemed warranted and imposed on the bank.
This regulatory action underscores the RBI’s commitment to maintaining integrity and adherence to regulatory guidelines within the banking sector, ensuring a robust and compliant financial environment for all stakeholders.
