Recorded RBI impact
Fine: Rs 5.00 L
Monetary penalty · Fresh imposition
Published by RBI
6 Aug 2009
Case Brief
The Reserve Bank of India penalised The Arunachal Pradesh State Co-operative Apex Bank Ltd., Arunachal Pradesh with Rs. 5.00 lakh under Section 47A(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (as applicable to co-operative societies). The penalty was imposed because the bank granted unsecured loans to its directors and their relatives, which contravened Section 20(1)(b) of the Act. RBI issued a show-cause notice, considered the bank's written reply, and concluded that the violation was substantiated.
Why RBI Acted
The RBI imposed a monetary penalty under Section 47A(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (as applicable to co-operative societies) after concluding that the bank had granted unsecured loans to its directors and their relatives. This conduct was found to contravene Section 20(1)(b) of the Act. A show-cause notice was issued, the bank replied in writing, and the RBI determined that the violation was substantiated and warranted penalty.
Operating Impact
The bank must absorb the monetary penalty; no operational restriction is described in the release. The action signals RBI censure for related-party lending and may prompt stronger internal controls over lending to directors and relatives.
Regulatory Basis
- Section 47A(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies)
- Section 20(1)(b) of the Act, ibid
Action Facts
- Primary Impact
- Fine: Rs 5.00 L
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank