Recorded RBI impact
Fine: Rs 5.00 L
Monetary penalty · Fresh imposition
Published by RBI
1 Jul 2010
Case Brief
The Reserve Bank of India imposed a monetary penalty of Rs. 5.00 lakh on Vasai Vikas Sahakari Bank Ltd., Thane, Maharashtra under Section 47(A)(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (as applicable to co-operative societies). RBI said the bank violated its directives by not following KYC norms while opening the current account of a director-related firm, granting unsecured advances to that firm, allowing cheque purchase beyond the permissible limit, allowing unsecured advances beyond the permissible limit, and allowing limits beyond the exposure ceiling. After issuing a show-cause notice and examining the bank's reply, RBI concluded that the violations were substantiated and penalised the bank.
Why RBI Acted
The Reserve Bank of India imposed a monetary penalty under Section 47(A)(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (as applicable to co-operative societies). The bank was found to have violated RBI directives by not following KYC norms while opening the current account of a director-related firm, granting unsecured advances to that firm, allowing cheque purchase beyond the permissible limit, allowing unsecured advances beyond the permissible limit, and allowing limits beyond the exposure ceiling. RBI issued a show-cause notice, considered the bank's written reply, and concluded that the violations were substantiated and warranted penalty.
Operating Impact
The bank must absorb the monetary penalty, and the action serves as an enforcement signal regarding KYC compliance, unsecured lending discipline, cheque-purchase limits, and exposure ceilings. No licence or operating restriction was imposed, but the bank faces reputational and compliance scrutiny going forward.
Regulatory Basis
- Section 47(A)(1)(b) read with 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