MC Explains: Why the RBI penalised Spandana Sphoorty, 8 other financial institutions

The Reserve Bank of India imposed monetary penalties on eight Indian cooperative banks and cancelled the certificates of registration of six non-banking financial companies, the central bank said on August 8.

The RBI also levied a monetary penalty on Spandana Sphoorty Financial, an NBFC.

The penalty amounts range from Rs 1 lakh to Rs 2.3 crore.

Here are brief details of the banks and NBFC and the reason they came on the RBI’s radar:

1. Spandana Sphoorty Financial: The RBI imposed a penalty of Rs 2.33 crore on the NBFC, the highest among the entities fined.

The NBFC failed to abide by guidelines and regulations on the pricing of credit. The Hyderabad-based NBFC became the largest microfinance institution in India and the sixth-largest globally in 2003, within five years of its establishment.

2. The Mehsana Urban Co-operative Bank: The RBI imposed a penalty of Rs 40 lakh on the bank which is based in Gujarat and has a few branches in Maharashtra.

The bank failed to pay interest on various term deposits. These included deposits that matured on Sundays/holidays/non-business working days and were repaid on the next working day without interest for the intervening days.

The bank also did not pay interest on unclaimed term deposits for the period after maturity and on the balance amount in current accounts of deceased individual depositors/proprietorship concerns from the date of their death to the date of repayment to their claimants.

3. Indapur Urban Cooperative Bank: This bank in Maharashtra was fined Rs 7 lakh for violating exposure norms.

The bank granted unsecured advances in breach of the aggregate ceiling for such advances.

4. Warud Urban Co-operative Bank: The RBI imposed a penalty of Rs 1 lakh on the Nagpur-based bank for violating Know Your Customer (KYC) norms.

The bank failed to comply with the prudential inter-bank counterparty limit. Moreover, there was insufficient technological infrastructure for effective identification and reporting of suspicious transactions.

5. Jila Sahakari Kendriya Bank Maryadit: This bank was asked to pay a penalty of Rs 1 lakh for failing to abide by KYC regulations.

The bank delayed submission of statutory/OSS returns to RBI and NABARD and had also not carried out periodic reviews of risk categorisation of its customers. There was no periodic update of KYC of its customers. Based in Madhya Pradesh, this bank mostly finances primary agriculture cooperative societies in four districts.

6. Yavatmal Urban Co-operative Bank: This bank was fined for not abiding by KYC regulations as mandated by the RBI, which levied a monetary penalty of Rs 3.5 lakh.

There has been no periodic review of risk categorisation or regular update of KYC details.

7. Garha Co-operative Bank: The RBI imposed a penalty of Rs 1 lakh on the bank for contravention and non-compliance of directions on income recognition and asset classification.

In June, the RBI extended the directions for a period of three months from May 25, 2022, to August 24, 2022, for the bank. The directions included certain restrictions and/or ceilings on the withdrawal/acceptance of deposits.

8. Goa State Co-operative Bank: The RBI imposed a penalty of Rs 2.51 lakh on the bank for failing to dispose of a non-banking asset within the statutory timeline.

The bank is one of the oldest cooperative institutions in India and can be traced back to 1889 when it was called Caixa De Prevedencia De Goa. The Goa Urban Co-operative Bank started functioning at Panaji in 1964 and the first branch was opened at Margao in 1967.

9. Chhattisgarh Rajya Sahakari Bank: This bank in Raipur has been slapped with a penalty of Rs 25 lakh for violating KYC regulations.

The bank received a licence from the RBI in 2010, although it has been in the banking business since 2000.