Recorded RBI impact
Fine: Rs 1.00 L
Monetary penalty · Fresh imposition
Published by RBI
3 Feb 2021
Case Brief
By an order dated February 2, 2021, RBI imposed a monetary penalty of ₹1.00 lakh on The Kalpavruksha Co-operative Bank Limited, Chikkanayakanahalli, Tumakuru District, Karnataka. The bank was found गैर-compliant with directions in RBI's Master Circular on Board of Directors-UCBs, specifically the prohibition on granting loans and advances to directors, their relatives, and entities in which they were interested. The order was issued after a show-cause notice, consideration of the bank's reply, and oral submissions made at the personal hearing. RBI clarified that the action is based on regulatory deficiencies and does not pronounce on the validity of individual transactions.
Why RBI Acted
RBI imposed a monetary penalty under Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949 after a statutory inspection found that the bank had not complied with directions contained in the 'Master Circular on Board of Directors-UCBs'. The breach related to directions prohibiting loans and advances to directors, their relatives, and the firms/concerns/companies in which they were interested. RBI issued a show-cause notice, considered the bank's reply and oral submissions, and concluded the contravention was substantiated.
Operating Impact
The bank must absorb the penalty and remain compliant with RBI's lending-related governance directions going forward. No depositors or borrowers are directly restricted by this order, but the bank is expected to avoid further prohibited lending to directors and connected parties.
Regulatory Basis
- Section 47 A (1) (c)
- Section 46 (4) (i) of the Banking Regulation Act, 1949
Action Facts
- Primary Impact
- Fine: Rs 1.00 L
- Order Date
- 2 Feb 2021
- Effective From
- 2 Feb 2021
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank