Recorded RBI impact
Fine: Rs 2.00 L
Monetary penalty · Fresh imposition
Published by RBI
31 Oct 2022
Case Brief
RBI imposed, by order dated October 20, 2022, a monetary penalty of Rs 2.00 lakh on The City Co-operative Bank Ltd., Mysore, Karnataka. The penalty was imposed for non-adherence to RBI directions issued under Management of Advances-UCBs, after inspection findings showed instances of sanction of gold loans in breach of the cap under the bullet repayment scheme. RBI said the action was taken under Section 47A(1)(c) read with Section 46(4)(i) and Section 56 of the Banking Regulation Act, 1949 (AACS), and that it was based on regulatory compliance deficiencies without pronouncing on the validity of customer transactions.
Why RBI Acted
RBI imposed a monetary penalty under Section 47A(1)(c) read with Section 46(4)(i) and Section 56 of the Banking Regulation Act, 1949 (AACS) because the bank failed to adhere to directions issued by RBI on Management of Advances-UCBs. The inspection report, based on the bank's financial position as on March 31, 2020, found instances of sanction of gold loans in breach of the cap under the bullet repayment scheme. After considering the bank's reply and oral submissions, RBI held the non-compliance substantiated and warranted penalty.
Operating Impact
The bank must bear the penalty and remain compliant with RBI directions on advances going forward. The action does not itself impose a new operating restriction on customers, but it reinforces the need to avoid further breaches in gold loan sanctioning and related lending norms.
Regulatory Basis
- Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- Fine: Rs 2.00 L
- Order Date
- 20 Oct 2022
- Effective From
- 20 Oct 2022
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank