Recorded RBI impact
Fine: Rs 2,500
Monetary penalty · Fresh imposition
Published by RBI
26 Sept 2022
Case Brief
The Reserve Bank of India imposed a monetary penalty of ₹0.25 lakh on Shree Botad Mercantile Co-operative Bank Ltd., Botad (Gujarat) by order dated September 22, 2022. RBI said the bank had sanctioned credit facilities to individuals where relatives of the bank's directors stood as guarantors, contrary to RBI directions on loans and advances to directors and related surety/guarantor arrangements. The penalty was imposed under Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949, after considering the bank's reply and oral submissions.
Why RBI Acted
RBI found, based on inspection for the bank's financial position as on March 31, 2021, that Shree Botad Mercantile Co-operative Bank Ltd. had sanctioned credit facilities to individuals where relatives of the bank's directors acted as guarantors. This was held to be a contravention of RBI 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, after the bank's reply and oral submissions were considered.
Operating Impact
The bank must bear the penalty and remain compliant with RBI directions on lending to directors and related-party guarantor arrangements. The order does not invalidate customer transactions, but it signals continued supervisory scrutiny for similar compliance lapses.
Regulatory Basis
- Section 47 A (1) (c) read with Sections 46 (4) (i) and 56 of the Banking Regulation Act, 1949
Action Facts
- Primary Impact
- Fine: Rs 2,500
- Order Date
- 22 Sept 2022
- Effective From
- 22 Sept 2022
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank