Recorded RBI impact
Fine: Rs 4.00 L
Monetary penalty · Fresh imposition
Published by RBI
24 Jan 2022
Case Brief
The Reserve Bank of India imposed a monetary penalty of Rs 4.00 lakh on The Associate Co-operative Bank Ltd., Surat (Gujarat) by order dated January 19, 2022. RBI said the bank had contravened directions on loans and advances to directors, relatives, and firms/concerns in which they were interested, and had also not complied with the Master Directions on Know Your Customer (KYC). The violations were identified during statutory inspection with reference to the bank’s financial position as on March 31, 2019, and after examination of related correspondence and the bank’s reply to the show-cause notice. RBI clarified that the penalty was for regulatory non-compliance and did not pronounce on the validity of any transaction or agreement.
Why RBI Acted
RBI found, based on its statutory inspection and related correspondence, that the bank had extended credit facilities to some of its directors and firms of their relatives, and had failed to undertake ongoing due diligence for effective identification and reporting of suspicious transactions in certain current accounts. These lapses were held to contravene RBI directions on loans and advances to directors/related interests and the Master Directions on Know Your Customer (KYC), attracting 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 and continue ensuring compliance with RBI’s lending restrictions and KYC obligations. The action has no stated operational ban, but it underscores heightened expectations around related-party lending, ongoing due diligence, and suspicious transaction monitoring for customer accounts.
Regulatory Basis
- Section 47 A (1) (c)
- Section 46 (4) (i)
- Section 56 of the Banking Regulation Act, 1949
Action Facts
- Primary Impact
- Fine: Rs 4.00 L
- Order Date
- 19 Jan 2022
- Effective From
- 19 Jan 2022
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank