Recorded RBI impact
Fine: Rs 2.00 L
Monetary penalty · Fresh imposition
Published by RBI
18 Dec 2023
Case Brief
The Reserve Bank of India imposed a monetary penalty of Rs 2,00,000 on The Lakhvad Nagarik Sahakari Bank Ltd., Lakhvad, Dist. Mehsana, Gujarat, for violating RBI directions relating to loans and advances to directors, their relatives and firms/concerns in which they are interested, as well as directions on placement of deposits with other banks by primary urban co-operative banks. The statutory inspection found that the bank sanctioned a loan to a director's relative, sanctioned loans where directors' relatives acted as guarantors, and breached prudential inter-bank gross exposure and counterparty exposure limits. RBI stated that the penalty was based on deficiencies in regulatory compliance and was not intended to pronounce upon the validity of any transaction or agreement with customers.
Why RBI Acted
RBI imposed a monetary penalty under section 47A(1)(c) read with sections 46(4)(i) and 56 of the Banking Regulation Act, 1949 after a statutory inspection found that the bank had sanctioned a loan to a relative of one of its directors, sanctioned loans where directors' relatives acted as guarantors, and breached prudential inter-bank gross exposure and inter-bank counterparty exposure limits. RBI concluded that these acts constituted non-compliance with its directions on loans and advances to directors/relatives and on placement of deposits with other banks by primary urban co-operative banks.
Operating Impact
The bank must absorb the penalty and address the compliance lapses identified by RBI. The order does not impose a continuing operational restriction, but it signals supervisory concern over lending to connected parties and inter-bank exposure management.
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 2.00 L
- Order Date
- 27 Nov 2023
- Effective From
- 27 Nov 2023
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank