Recorded RBI impact
Fine: Rs 4.00 L
Monetary penalty · Fresh imposition
Published by RBI
31 Oct 2022
Case Brief
The Reserve Bank of India imposed a monetary penalty on Nagar Sahakari Bank Ltd., Maharajganj, UP by order dated October 27, 2022. The penalty was for non-compliance with directions issued under the Supervisory Action Framework (SAF). RBI said an inspection of the bank’s financial position as on March 31, 2021 revealed that the bank had extended fresh loans and advances carrying risk weights of 100% and above and had offered interest on deposits for various tenors at rates higher than reference rates, both in contravention of RBI directions. After issuing a notice, considering the bank’s reply and oral submissions, RBI concluded the charges were substantiated and imposed a penalty under the Banking Regulation Act, 1949.
Why RBI Acted
RBI imposed a monetary penalty under Section 47A(1)(c) read with Section 46(4)(i) and Section 56 of the Banking Regulation Act, 1949, after an inspection found that the bank had violated directions issued under the Supervisory Action Framework. Specifically, the bank extended fresh loans and advances carrying risk weights of 100% and above and offered interest on deposits for various tenors at rates higher than the reference rates, contrary to RBI directions. The penalty was imposed after considering the bank's reply and oral submissions, and RBI stated that the action was based on deficiencies in regulatory compliance and was not meant to pronounce on the validity of customer transactions.
Operating Impact
The bank must absorb the monetary penalty and address the compliance lapses identified by RBI. The order does not itself impose a new operational ban, but it signals supervisory concern over lending discipline and deposit pricing practices.
Regulatory Basis
- Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949
Action Facts
- Primary Impact
- Fine: Rs 4.00 L
- Order Date
- 27 Oct 2022
- Effective From
- 27 Oct 2022
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank