Recorded RBI impact
Fine: Rs 50,000
Monetary penalty · Fresh imposition
Published by RBI
17 Oct 2022
Case Brief
The RBI imposed a monetary penalty on The Gandhidham Mercantile Co-operative Bank Ltd., Gandhidham, District Kutch, Gujarat, by order dated October 13, 2022. The bank was found to have contravened RBI directions concerning loans and advances to directors, their relatives, and firms/concerns in which they are interested, as well as loans where directors’ relatives stood as surety/guarantor. The action followed a statutory inspection referencing the bank’s financial position as on March 31, 2021, and was taken under Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
Why RBI Acted
RBI found that, based on its statutory inspection with reference to the bank’s financial position as on March 31, 2021, the bank had sanctioned a loan in which a director’s relative had an interest and another loan where a director’s relative acted as surety/guarantor. This was held to be a contravention of RBI directions on loans and advances to directors, relatives and connected concerns, and on directors/relatives acting as sureties or guarantors. The penalty was imposed 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 remain compliant with RBI’s lending-related directions going forward. The action does not, on its face, restrict operations beyond the penalty, but it underscores the need to avoid related-party lending and guarantee-related breaches.
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 50,000
- Order Date
- 13 Oct 2022
- Effective From
- 13 Oct 2022
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank