Recorded RBI impact
Fine: Rs 50,000
Monetary penalty · Fresh imposition
Published by RBI
23 Nov 2023
Case Brief
RBI, by an order dated October 13, 2023, imposed a monetary penalty of Rs 50,000 on The Khambhat Nagarik Sahakari Bank Ltd., Khambhat, Gujarat. The bank was found to have sanctioned loans where a relative of one of its directors stood as guarantor, breaching RBI directions on loans and advances to directors, their relatives, and firms/concerns in which they are interested, along with the clarification on directors acting as sureties/guarantors. RBI stated the penalty was imposed under Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949, after considering the bank’s reply and oral submissions.
Why RBI Acted
RBI imposed a monetary penalty after its statutory inspection found that the bank had sanctioned loans where a relative of one of the directors stood as guarantor, which was treated as non-compliance with RBI directions on ‘Loans and Advances to directors, relatives and firms/concerns in which they are interested’ and the related clarification on directors acting as sureties/guarantors. The action was taken 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 financial penalty and ensure future lending and guarantee arrangements comply with RBI’s related-party lending directions. The release does not indicate any restriction on operations, but it signals heightened compliance expectations for the bank’s lending and governance controls.
Regulatory Basis
- Section 47A(1)(c)
- Sections 46 (4) (i)
- Section 56 of the Banking Regulation Act, 1949
Action Facts
- Primary Impact
- Fine: Rs 50,000
- Order Date
- 13 Oct 2023
- Effective From
- 13 Oct 2023
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank