Recorded RBI impact
Fine: Rs 1.50 L
Monetary penalty · Fresh imposition
Published by RBI
30 Nov 2023
Case Brief
By an order dated November 03, 2023, RBI imposed a monetary penalty of Rs 1.50 lakh on The Mandal Nagarik Sahakari Bank Ltd., Mandal, Dist. Ahmedabad, Gujarat. The penalty was imposed for non-compliance with RBI directions on loans and advances to directors/relatives and firms/concerns in which they are interested, the related clarification on directors acting as sureties/guarantors, and on co-operative banks' interest rate on deposits. RBI found that the bank sanctioned loans where a relative of one of its directors stood as guarantor and failed to pay interest at the applicable rate on certain term deposits, including deposits maturing on holidays/non-business days, prematurely withdrawn deposits, and matured overdue term deposits. RBI stated the action was based on deficiencies in regulatory compliance and not intended to pronounce upon the validity of any transaction or agreement.
Why RBI Acted
RBI imposed a monetary penalty under Section 47-A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949, after inspection findings showed non-compliance with directions on (i) loans and advances to directors, relatives and firms/concerns in which they are interested and related clarification on directors as sureties/guarantors, and (ii) co-operative banks' interest rate on deposits. The bank had sanctioned loans where a relative of a director stood as guarantor, and it did not pay applicable interest on term deposits that matured on a Sunday/holiday/non-business day and were paid on the next working day, on deposits withdrawn before maturity for the period they remained with the bank, and on matured overdue term deposits from maturity until repayment.
Operating Impact
The bank must absorb the monetary penalty and ensure future compliance with RBI directions on connected lending and deposit-interest computation. No restriction on operations is described in this release, but the findings signal regulatory scrutiny over lending governance and depositor interest practices.
Regulatory Basis
- Section 47-A (1) (c)
- Sections 46 (4) (i)
- Section 56 of the Banking Regulation Act, 1949
Action Facts
- Primary Impact
- Fine: Rs 1.50 L
- Order Date
- 3 Nov 2023
- Effective From
- 3 Nov 2023
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank