Recorded RBI impact
Fine: Rs 5.00 L
Monetary penalty · Fresh imposition
Published by RBI
22 Jul 2024
Case Brief
RBI, by order dated July 16, 2024, imposed a monetary penalty of ₹5.00 lakh on The Yashwant Co-operative Bank Limited, Satara, Maharashtra. The penalty was levied after a statutory inspection and a show-cause process, with RBI finding sustained contraventions of section 26A read with section 56 of the Banking Regulation Act, 1949, as well as non-compliance with RBI directions relating to income recognition, asset classification and provisioning, exposure norms, KYC, and maintenance of deposit accounts for urban co-operative banks. The bank’s lapses included failure to classify certain loan accounts as NPAs and provision accordingly, sanctioning loans beyond permitted unsecured advance and member exposure ceilings, not reviewing customer risk categorisation as required, not transferring long-unclaimed balances to the DEAF, and charging penal fees for minimum balance shortfalls without customer notification.
Why RBI Acted
Following a statutory inspection with reference to the bank’s financial position as on March 31, 2023, RBI issued a show-cause notice and, after considering the bank’s reply, sustained charges of contravention of section 26A read with section 56 of the Banking Regulation Act, 1949 and non-compliance with RBI directions on Income Recognition, Asset Classification, Provisioning and Other Related Matters- UCBs; Exposure Norms and Statutory / Other Restrictions - UCBs; Know Your Customer norms; and Maintenance of Deposit Accounts – Primary (Urban) Co-operative Banks. The specific violations included failure to classify certain loan accounts as NPAs and make provisions, sanctioning loans in breach of unsecured advance and exposure ceilings, failure to review customer risk categorisation periodically, failure to transfer unclaimed balances older than 10 years to the Depositor Education and Awareness Fund, and levying flat penal charges without notifying customers for shortfall in minimum balance maintenance.
Operating Impact
The bank must absorb the monetary penalty and strengthen compliance controls across loan classification, exposure monitoring, KYC refresh, dormant/unclaimed deposit handling, and customer charge disclosures. The order does not itself impose a business restriction, but RBI may consider further supervisory action if similar lapses continue.
Regulatory Basis
- section 26 A read with section 56 of the Banking Regulation Act, 1949
- section 47A(1)(c) read with sections 46(4)(i) and 56 of the BR Act
Action Facts
- Primary Impact
- Fine: Rs 5.00 L
- Order Date
- 16 Jul 2024
- Effective From
- 16 Jul 2024
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank