Skip to Main Content

The Lunawada Peoples Co-operative Bank Ltd

Co-operative bankMahisagar, Gujarat

The RBI action, regulatory basis, and operating impact linked to this entity.

Recorded RBI impact

Fine: Rs 50,000

Monetary penalty · Fresh imposition

S1

Published by RBI

3 Oct 2022

Case Brief

RBI imposed a monetary penalty of Rs 50,000 on The Lunawada Peoples Co-operative Bank Ltd., Mahisagar (Gujarat) by order dated September 27, 2022. The bank was found to have contravened RBI directions relating to loans and advances to directors, their relatives, and firms/concerns in which they are interested, as well as directions on directors' relatives acting as sureties/guarantors. The violation arose from RBI's statutory inspection and related examination, which found that the bank had sanctioned three loans to directors' relatives and five loans where directors' relatives stood as surety/guarantors. 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

Lending normsGovernance oversight

RBI found, from its statutory inspection with reference to the bank's financial position as on March 31, 2021, that the bank had sanctioned three loans to relatives of its directors and five loans where directors' relatives stood as surety/guarantors. This was held to be a contravention of RBI's directions on 'Loans and advances to directors, relatives and firms/concerns in which they are interested' and 'Loans and advances to directors etc - directors as surety/guarantors - Clarification'. The penalty was imposed 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 monetary penalty and continue complying with RBI's lending restrictions relating to directors, relatives, and connected persons. The order does not nullify customer transactions, but it signals continued supervisory scrutiny over related-party lending practices.

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 50,000
Order Date
27 Sept 2022
Effective From
27 Sept 2022
Entities Affected
1
Entity Role
Primary
Entity Type
Co-operative bank