Recorded RBI impact
Fine: Rs 1.00 L
Monetary penalty · Fresh imposition
Published by RBI
14 Mar 2022
Case Brief
By an order dated March 07, 2022, RBI imposed a monetary penalty of Rs 1.00 lakh on The Navnirman Co-operative Bank Ltd., Ahmedabad (Gujarat). The penalty was imposed after inspection found that the bank sanctioned a loan to a relative of one of its directors and granted loans where relatives of directors stood as surety/guarantor, contrary to RBI directions on loans and advances to directors, their relatives, and related firms/concerns, as well as clarification on directors acting as sureties/guarantors for UCBs. RBI stated that the action was based on deficiencies in regulatory compliance and did not pronounce on the validity of any customer transaction.
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 statutory inspection revealed that the bank had sanctioned a loan to a director's relative and had granted loans in which relatives of directors acted as surety/guarantor. RBI concluded that these acts violated its 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-UCBs'.
Operating Impact
The bank must absorb the monetary penalty and ensure future lending complies with RBI directions on director-linked exposures and related guarantees/sureties. The action does not impose an operational restriction, but it signals heightened compliance expectations in lending oversight and related-party 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
- 7 Mar 2022
- Effective From
- 7 Mar 2022
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank