Recorded RBI impact
Fine: Rs 50,000
Monetary penalty · Fresh imposition
Published by RBI
22 Dec 2023
Case Brief
The Reserve Bank of India imposed a monetary penalty of Rs 50,000 on Bhabhar Vibhag Nagarik Sahakari Bank Limited, Bhabhar, District Banaskantha, Gujarat, by order dated November 30, 2023. The penalty was levied for non-compliance with RBI directions relating to loans and advances to directors, their relatives, and firms/concerns in which they are interested, read with the clarification on directors acting as surety/guarantors. RBI’s inspection found that the bank had sanctioned a loan where a relative of one of the bank’s directors stood as guarantor. After considering the bank’s reply and oral submissions, RBI held the charge substantiated and imposed the penalty under section 47A(1)(c) read with sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
Why RBI Acted
RBI imposed a monetary penalty after its statutory inspection and review of the inspection report, risk assessment report, and related correspondence found that the bank had sanctioned a loan in which a relative of one of the directors of the bank acted as guarantor. RBI concluded that this amounted to non-compliance with its directions on 'Loans and advances to directors, relatives and firms/concerns in which they are interested' read with directions on 'Loans and Advances to directors etc. - directors as surety/guarantors – Clarification'. The penalty was imposed under section 47A(1)(c) read with sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
Operating Impact
The bank must absorb the monetary penalty and ensure future lending decisions comply with RBI restrictions on loans involving directors, relatives, and related interests. The action does not itself void any transaction, but it signals heightened regulatory scrutiny over governance and related-party lending practices.
Regulatory Basis
- section 47A(1)(c) read with sections 46(4)(i) and 56 of the Banking Regulation Act, 1949
Action Facts
- Primary Impact
- Fine: Rs 50,000
- Order Date
- 30 Nov 2023
- Effective From
- 30 Nov 2023
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank