RBI imposes monetary penalty on Bombay Mercantile Co-operative Bank

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The Reserve Bank of India (RBI) on September 3 said it has imposed a monetary penalty of Rs 50 lakh on Bombay Mercantile Co-operative Bank for non-compliance with directions issued by the central bank.

The violations pertain to the Reserve Bank of India rules on interest rate on deposits, the central bank said in a release. This action is based on deficiency in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers, the RBI said.

The statutory inspection of the bank conducted by the RBI with reference to the bank’s financial position as on March 31, 2019 revealed that the bank had offered interest rates on NRE deposits higher than those offered by it on comparable domestic rupee term deposits, the RBI said.

Also, the bank had sanctioned unsecured advances, resulting in non-compliance with the directions issued by RBI. Subsequently, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for contravention of the directions issued by RBI.

"After considering the bank’s reply to the notice and oral submissions made in the personal hearing, RBI came to the conclusion that the aforesaid charge of non-compliance with RBI directions was substantiated and warranted imposition of monetary penalty," the RBI said.