Recorded RBI impact
Fine: Rs 5.00 L
Monetary penalty · Fresh imposition
Published by RBI
5 Nov 2015
Case Brief
The Reserve Bank of India imposed a monetary penalty on The Vardhman Co-operative Bank Ltd., Dist. Jamnagar (Gujarat), under Section 47A(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949. The penalty was based on violations of RBI guidelines and instructions relating to KYC, failure to identify suspicious transactions and file STRs with FIU-India, and improper implementation of customer risk categorisation. RBI had issued a show-cause notice, considered the bank's written reply and personal submissions, and held that the violations were substantiated.
Why RBI Acted
RBI imposed a monetary penalty under Section 47A(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (as applicable to co-operative societies) after scrutiny found violations of RBI instructions relating to Know Your Customer (KYC) norms. The bank was also found to have failed to put in place a system to identify suspicious transactions and to file STRs with FIU-India, and to have not implemented customer risk categorisation properly. RBI issued a show-cause notice, considered the bank's reply and personal submissions, and concluded that the violations were substantiated and warranted penalty.
Operating Impact
The bank must absorb the penalty and address the compliance gaps identified by RBI, especially in KYC, suspicious transaction monitoring, STR reporting, and customer risk categorisation. The action does not by itself suspend operations, but it signals heightened regulatory scrutiny and the need for stronger AML controls going forward.
Regulatory Basis
- Section 47A (1)(b)
- Section 46(4) of the Banking Regulation Act, 1949 (As applicable to Co-operative Societies)
Action Facts
- Primary Impact
- Fine: Rs 5.00 L
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank