Recorded RBI impact
Fine: Rs 2.00 L
Monetary penalty · Fresh imposition
Published by RBI
10 Aug 2023
Case Brief
RBI, by order dated August 03, 2023, imposed a monetary penalty of Rs 2.00 lakh on The Islampur Urban Co-operative Bank Limited, Islampur, Maharashtra. The penalty was imposed for non-compliance with Section 26A read with Section 56 of the Banking Regulation Act, 1949 and certain provisions of the RBI (Know Your Customer) Directions, 2016 and Maintenance of Deposit Accounts-UCBs. RBI's inspection found that the bank had not transferred the eligible amount to the Depositor Education and Awareness Fund (DEAF) and had failed to carry out periodic review of customer risk categorisation and annual review of inoperative accounts. After a show-cause notice and review of the bank's reply, RBI held the charges substantiated and levied the penalty under Section 47A(1)(c) read with Section 46(4)(i) and Section 56 of the BR Act.
Why RBI Acted
Following a statutory inspection with reference to the bank's financial position as on March 31, 2022 and review of related correspondence, RBI found that the bank had not transferred the eligible amount to the Depositor Education and Awareness Fund (DEAF) and had not conducted periodic review of risk categorisation of customers as well as annual review of inoperative accounts. After issuing a show-cause notice and considering the bank's reply, RBI concluded that the contraventions of Section 26A read with Section 56 of the Banking Regulation Act, 1949 and certain provisions of the RBI (Know Your Customer) Directions, 2016 and Maintenance of Deposit Accounts-UCBs were substantiated and imposed a monetary penalty under Section 47A(1)(c) read with Section 46(4)(i) and Section 56 of the BR Act.
Operating Impact
The bank must bear the monetary penalty, but the release does not impose any new operating restriction or cancellation. The compliance issues highlighted concern depositor-account maintenance, DEAF transfers, and KYC/risk-review controls, so the bank remains expected to strengthen these controls going forward.
Regulatory Basis
- Section 26A read with Section 56 of the Banking Regulation Act, 1949
- Section 47 A(1)(c) read with Section 46(4)(i) and Section 56 of the BR Act
- Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016
- Maintenance of Deposit Accounts-UCBs
Action Facts
- Primary Impact
- Fine: Rs 2.00 L
- Order Date
- 3 Aug 2023
- Effective From
- 3 Aug 2023
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank