Recorded RBI impact
Fine: Rs 25,000
Monetary penalty · Fresh imposition
Published by RBI
20 Nov 2023
Case Brief
RBI, by order dated October 12, 2023, imposed a monetary penalty on The Pudukkottai Co-operative Town Bank Ltd., Pudukkottai, Tamil Nadu for non-compliance with RBI’s directions on ‘Board of Directors - UCBs’. The penalty was imposed under Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949 (AACS). RBI’s inspection, with reference to the bank’s financial position as on March 31, 2022, revealed that the bank had extended loans to its directors. After issuing a show-cause notice and considering the bank’s reply and oral submissions, RBI concluded that the violation was substantiated and warranted the penalty.
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 (AACS). The statutory inspection for the bank’s position as on March 31, 2022 found that it had extended loans to its directors, which amounted to non-compliance with RBI’s directions on ‘Board of Directors - UCBs’. After the show-cause process and oral hearing, RBI held the contravention substantiated and imposed the penalty.
Operating Impact
The bank must bear the monetary penalty and ensure future compliance with RBI’s governance directions, especially restrictions on lending to directors. There is no stated operational ban or restriction on customer-facing business from this order, but the bank remains exposed to further supervisory action if similar non-compliance continues.
Regulatory Basis
- Section 47A (1) (c)
- Sections 46 (4) (i) and 56 of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- Fine: Rs 25,000
- Order Date
- 12 Oct 2023
- Effective From
- 12 Oct 2023
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank