Recorded RBI impact
Fine: Rs 3.00 L
Monetary penalty · Fresh imposition
Published by RBI
3 Jun 2024
Case Brief
The Reserve Bank of India imposed a monetary penalty of ₹3.00 lakh on The Bavla Nagarik Sahakari Bank Ltd., Dist. Ahmedabad, Gujarat, by order dated May 22, 2024. RBI said the penalty was for non-compliance with directions relating to loans and advances to directors, relatives and connected firms/concerns, as well as the KYC Master Direction. The bank had sanctioned or renewed loans where directors' relatives were interested or served as guarantors, and it had not carried out risk-based periodic updation of KYC as required. The penalty was imposed under section 47A(1)(c) read with sections 46(4)(i) and 56 of the Banking Regulation Act, 1949, following supervisory findings and a show-cause process.
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 its statutory inspection found non-compliance with RBI directions on loans and advances to directors/relatives/firms in which they are interested, loans and advances to directors etc. where directors act as surety/guarantors, and the Master Direction on Know Your Customer (KYC). The sustained charges were that the bank sanctioned/renewed loans involving relatives of directors, including cases where such relatives stood as guarantors, and did not perform risk-based periodic KYC updation as prescribed.
Operating Impact
The bank must bear the monetary penalty and remains subject to RBI oversight. The order does not itself bar operations, but it signals compliance deficiencies in related-party lending and KYC controls that may attract further supervisory or enforcement action.
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 3.00 L
- Order Date
- 22 May 2024
- Effective From
- 22 May 2024
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank