The Reserve Bank of India (RBI) has taken an action against Navsarjan Industrial Co-operative Bank Ltd., situated in Ankleshwar, District Bharuch, Gujarat, by imposing a monetary penalty of Rs 7.00 lakh.
According to RBI, this penalty, enacted through an order dated December 14, 2023, has been imposed due to the bank’s non-compliance with RBI directives on ‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (UCBs),’ ‘Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016,’ and the contravention of ‘Section 26A (2) read with Section 56 of the Banking Regulation Act, 1949 (BR Act).’
The penalty is a result of the powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the BR Act.
It is crucial to note that this measure is centred around deficiencies in regulatory compliance and does not pass judgment on the validity of any transactions or agreements entered into by the bank with its customers.
The background leading to this penalty involves the statutory inspection of the bank conducted by RBI concerning its financial position as of March 31, 2022.
Examination of the Inspection Report, Risk Assessment Report, and all related correspondence revealed multiple issues, including a breach of inter-bank gross and counterparty exposure limits, failure to conduct a review of risk categorization of accounts as per prescribed periodicity, and not transferring the eligible amount to the Depositor Education and Awareness Fund.
In response to these findings, RBI issued a notice to the bank, instructing it to show cause as to why a penalty should not be imposed for the failure to comply with the mentioned directions and provisions of the BR Act.
Following the bank’s reply to the notice and oral submissions made during the personal hearing, RBI concluded that the charges of non-compliance with the aforesaid RBI directions and provisions of the BR Act were substantiated, warranting the imposition of a monetary penalty on Navsarjan Industrial Co-operative Bank Ltd.
