Recorded RBI impact
Fine: Rs 4.00 L
Monetary penalty · Fresh imposition
Published by RBI
2 May 2022
Case Brief
The Reserve Bank of India imposed a monetary penalty of Rs 4.00 lakh on Shree Kadi Nagarik Sahakari Bank Ltd., Kadi (Gujarat) by order dated April 29, 2022. RBI said the bank had violated directions relating to loans and advances to directors, relatives and firms/concerns in which they are interested; loans and advances where directors act as sureties/guarantors; bank finance against shares and debentures for UCBs; and donations to trusts/institutions where directors or relatives hold positions or are interested. The inspection found instances of loans to trusts/firms linked to directors, credit facilities where directors’ relatives were guarantors, credit extended to a stock broker, and a donation to a trust connected to a director’s relative. RBI issued a show-cause notice, considered the bank’s reply and oral submissions, and then imposed the penalty under the Banking Regulation Act.
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, after inspection found that the bank had sanctioned loans to trusts/firms in which a director or a director’s relative had interest, sanctioned credit facilities to individuals where relatives of directors were guarantors, sanctioned credit facility to a stock broker, and made a donation to a trust where a director’s relative was a trustee. RBI concluded these acts contravened its directions on loans and advances to directors/relatives/firms and concerns, loans and advances to directors where directors act as sureties/guarantors, bank finance against shares and debentures for UCBs, and donations to trusts and institutions where directors or their relatives hold positions or have interests.
Operating Impact
The bank must absorb the monetary penalty and ensure future compliance with RBI’s related-party lending, guarantee, share-finance, and donation restrictions. No operational ban was imposed, but the case signals heightened regulatory scrutiny of transactions involving directors and connected parties.
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 4.00 L
- Order Date
- 29 Apr 2022
- Effective From
- 29 Apr 2022
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank