Recorded RBI impact
Fine: Rs 1.00 L
Monetary penalty · Fresh imposition
Published by RBI
19 May 2011
Case Brief
The Reserve Bank of India has imposed a monetary penalty on The Kheralu Nagarik Sahakari Bank Ltd., Kheralu, Dist. Mehsana (Gujarat), under Section 47(A)(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (AACS). RBI found that the bank sanctioned hypothecation loans in violation of its operational instructions and failed to adhere to KYC norms in a large number of accounts. After considering the bank's reply to the show cause notice and its personal submissions, RBI concluded that the violations were substantiated and imposed a penalty of Rs 1 lakh.
Why RBI Acted
RBI imposed a monetary penalty under Section 47(A)(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (AACS) after finding that the bank sanctioned hypothecation loans in violation of operational instructions issued by RBI and did not adhere to Know Your Customer (KYC) norms in many accounts. The bank responded to a show cause notice and submitted written and personal submissions, but RBI concluded the violations were substantiated and warranted penalty.
Operating Impact
The bank must absorb the monetary penalty and ensure future compliance with RBI's lending instructions and KYC requirements. The order does not describe any operating restriction, but it signals heightened regulatory scrutiny over the bank's loan origination and customer due diligence practices.
Regulatory Basis
- Section 47(A)(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- Fine: Rs 1.00 L
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank