Recorded RBI impact
Fine: Rs 2.00 L
Monetary penalty · Fresh imposition
Published by RBI
15 May 2018
Case Brief
The Reserve Bank of India imposed a monetary penalty of ₹2.00 lakh on The Vriddhachalam Co-operative Urban Bank Ltd. (No.E 81), Vriddhachalam, under Section 47A(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (as applicable to co-operative societies). The penalty was for violation of RBI’s directive prohibiting extension of loans and advances to directors/their relatives, referenced in Para 5 of the Master Circular dated July 1, 2013. RBI issued a show-cause notice, considered the bank’s written reply, and found the contravention substantiated.
Why RBI Acted
RBI imposed a penalty under Section 47A(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (as applicable to co-operative societies) because the bank violated the RBI directive prohibiting extension of loans and advances to directors/their relatives, as set out in Para 5 of the Master Circular dated July 1, 2013. The bank received a show-cause notice, submitted a written reply, and RBI concluded the violation was substantiated and warranted penalty.
Operating Impact
The bank must absorb the ₹2 lakh penalty; no additional restriction or restoration action is described in the release. The action serves as a compliance sanction for lending to directors/relatives, with no stated direct impact on customers beyond the penalty and regulatory censure.
Regulatory Basis
- Section 47A(1)(b)
- Section 46(4)
- Banking Regulation Act, 1949 (As applicable to Co-operative Societies)
Action Facts
- Primary Impact
- Fine: Rs 2.00 L
- Order Date
- 1 Jul 2013
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank