Recorded RBI impact
Fine: Rs 50,000
Monetary penalty · Fresh imposition
Published by RBI
8 Aug 2024
Case Brief
RBI, by order dated August 05, 2024, imposed a monetary penalty on Nidhi Co-operative Bank Ltd., Ahmedabad, Gujarat for violating its directions on loans and advances to directors, relatives and firms/concerns in which they are interested. RBI said supervisory findings showed non-compliance, and after a show-cause notice, the bank's reply, and oral submissions, it found the charge sustained that loans were sanctioned where relatives of directors acted as guarantors. The penalty was imposed under section 47A(1)(c) read with sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
Why RBI Acted
Following a statutory inspection with reference to the bank's financial position as on March 31, 2023, RBI found supervisory findings of non-compliance with its directions on 'Loans and Advances to directors, relatives and firms/concerns in which they are Interested'. After issuing a show-cause notice and considering the bank's reply and oral submissions, RBI concluded that the charge of sanctioning loans wherein relatives of directors stood as guarantors was sustained, and imposed a penalty 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; the release does not impose any new operating restriction or customer-facing ban. The action reflects a compliance breach in related-party lending governance and may be followed by any further regulatory action RBI considers appropriate.
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
- 5 Aug 2024
- Effective From
- 5 Aug 2024
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank