Recorded RBI impact
Fine: Rs 1.00 L
Monetary penalty · Fresh imposition
Published by RBI
2 Sept 2021
Case Brief
RBI, by order dated September 02, 2021, imposed a monetary penalty of ₹1.00 lakh on The Kosamba Mercantile Co-operative Bank Ltd., Kosamba, Dist. Surat (Gujarat). The penalty was for non-compliance with RBI's directions in the circular on loans and advances to directors, relatives, and firms/concerns in which they are interested, after inspection findings showed the bank had sanctioned loans to relatives of a director. RBI issued a show-cause notice, considered the bank's reply and oral submissions, and then held the charge substantiated. The action was taken under section 47A(1)(c) read with sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
Why RBI Acted
RBI found, based on its statutory inspection as of March 31, 2019 and subsequent examination of the inspection report and correspondence, that the bank had sanctioned loans to relatives of a director. This resulted in non-compliance with RBI's Circular on 'Loans and advances to directors, relatives and firms / concerns in which they are interested' dated April 29, 2003. After issuing a show-cause notice and considering the bank's reply and oral submissions, RBI concluded the charge was substantiated and imposed a penalty 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 penalty and ensure future compliance with RBI's related-party lending restrictions. The action does not itself impose an operational ban, but it signals heightened regulatory scrutiny over the bank's lending 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 1.00 L
- Order Date
- 2 Sept 2021
- Effective From
- 2 Sept 2021
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank