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The Sarvodaya Sahakari Bank Limited, Modasa, Gujarat

Co-operative bankModasa, Gujarat

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

Recorded RBI impact

Fine: Rs 6.00 L

Monetary penalty · Fresh imposition

S2

Published by RBI

3 Oct 2023

Case Brief

RBI, by order dated August 31, 2023, imposed a monetary penalty of Rs 6 lakh on The Sarvodaya Sahakari Bank Limited, Modasa, Gujarat. The penalty was imposed under Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949, for non-compliance with RBI directions relating to loans and advances to directors/relatives and related concerns, placement of deposits with other banks, and interest rate on deposits. RBI's inspection found sanction of credit facilities to a director's relative and guarantor-related breaches, breaches of inter-bank exposure limits, and non-payment of interest on matured fixed deposits for the required period/rate. RBI clarified that the penalty was based on regulatory compliance deficiencies and not intended to pronounce on the validity of any customer transaction.

Why RBI Acted

Lending normsCapital & exposure normsCustomer protection

A statutory inspection of the bank as of March 31, 2022, revealed that it sanctioned credit facilities to a relative of one of its directors and to cases where relatives of directors stood as guarantors, breached inter-bank gross exposure and counterparty exposure limits, and failed to pay interest on matured fixed deposits from maturity until repayment at the applicable savings rate or contracted rate, whichever was lower. RBI imposed the penalty under Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949, after issuing a show-cause notice and considering the bank's reply and oral submissions.

Operating Impact

The bank must absorb the penalty and ensure future compliance with RBI's lending, exposure-limit, and deposit-interest directions. The action does not by itself restrict operations, but it signals heightened supervisory scrutiny over the bank's governance and compliance 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 6.00 L
Order Date
31 Aug 2023
Effective From
31 Aug 2023
Entities Affected
1
Entity Role
Primary
Entity Type
Co-operative bank