Recorded RBI impact
Fine: Rs 1.50 L
Monetary penalty · Fresh imposition
Published by RBI
6 Oct 2023
Case Brief
The Reserve Bank of India imposed a monetary penalty of Rs 1.50 lakh on The Karnavati Co-operative Bank Ltd., Ahmedabad, Gujarat. RBI said the bank had violated directions relating to loans and advances to directors, their relatives and firms/concerns in which they are interested, as well as directions on fraud reporting by UCBs. The violations were identified during statutory inspection with reference to the bank's financial position as on March 31, 2022. RBI found that the bank sanctioned a loan where a relative of a director acted as guarantor, and also failed to report a fraud case to RBI within the prescribed timeline. The penalty was imposed 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, in the bank's statutory inspection with reference to its financial position as on March 31, 2022, the bank had sanctioned a loan where a relative of one of its directors stood as guarantor, and had not reported a fraud case to RBI within the prescribed timeline. The penalty was imposed under Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949, for contravention of RBI directions on loans and advances to directors/related concerns and on fraud reporting.
Operating Impact
The bank must absorb the monetary penalty and remain compliant with RBI's directions on connected lending and fraud reporting going forward. There is no indicated restriction on its operations, but the findings signal heightened supervisory scrutiny of its governance and compliance controls.
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 1.50 L
- Order Date
- 31 Aug 2023
- Effective From
- 31 Aug 2023
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank