Recorded RBI impact
Fine: Rs 2.00 L
Monetary penalty · Fresh imposition
Published by RBI
16 Oct 2023
Case Brief
The Reserve Bank of India imposed a monetary penalty of Rs 2.00 lakh on Nagarik Sahakari Bank Ltd., Babra, Gujarat, by order dated September 18, 2023. The penalty was levied for contravention of Section 26A(2) of the Banking Regulation Act, 1949 and RBI directions on loans and advances to directors/related parties, placement of deposits with other banks by primary (urban) co-operative banks, and interest rate on deposits. RBI's inspection found that the bank had not transferred the eligible amount to the Depositor Education and Awareness Fund, had sanctioned a credit facility where a relative of a director was guarantor, had breached inter-bank gross exposure and counterparty exposure limits, and had not paid interest on matured unpaid term deposits for the period they remained unclaimed. RBI said the penalty was based on deficiencies in regulatory compliance and did not pronounce on the validity of any transaction or agreement with customers.
Why RBI Acted
RBI imposed a monetary penalty under Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949. On inspection with reference to the bank's financial position as on March 31, 2022, RBI found that the bank had not transferred the eligible amount to the Depositor Education and Awareness Fund, had sanctioned a credit facility where a relative of a director was guarantor, had breached prudential inter-bank gross exposure and counterparty exposure limits, and had not paid interest on matured unpaid term deposits for the period they remained unclaimed. RBI concluded these contraventions of Section 26A(2) of the BR Act and the cited RBI directions were substantiated.
Operating Impact
The bank must absorb the penalty and continue complying with the cited BR Act provisions and RBI directions. The action does not, by itself, restrict operations or customer access, but it signals regulatory non-compliance and may increase scrutiny of the bank's lending, inter-bank exposure, depositor fund transfer, and deposit interest practices.
Regulatory Basis
- Section 26 A (2) of the Banking Regulation Act, 1949 (BR Act)
- Section 47 A (1) (c) read with Sections 46 (4) (i) and 56 of the BR Act
Action Facts
- Primary Impact
- Fine: Rs 2.00 L
- Order Date
- 18 Sept 2023
- Effective From
- 18 Sept 2023
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank