The Reserve Bank of India (RBI) on August 29 imposed a monetary penalty on eight cooperative banks for violating certain norms.
The RBI has imposed a monetary penalty of Rs 5 lakh on Uttar Pradesh-based National Urban Co-operative Bank after an inspection by the banking regulator found that the lender failed to identify certain accounts as non-performing assets, according to a release.
Additionally, the RBI has imposed a monetary penalty of Rs 1 lakh on Kendrapara Urban Cooperative Bank for not complying with directions pertaining to Know Your Customer (KYC). The bank failed to undertake periodic review of risk categorisation of customer accounts, the regulator said in a separate release.
The regulator has also slapped a penalty of Rs 10 lakh each on Andhra Pradesh-based Kakinada Co-operative Town Bank and Nellore Co-operative Urban Bank Limited. While Kakinada Co-operative Town Bank did not comply with directions issued under Income Recognition, Asset Classification, Provisioning and Other related Matters, the latter violated rules issued on prohibition of loans and advances to directors and their relatives and firms or concerns in which they are interested and exposure norms and statutory or other restrictions, said the RBI.
Similarly, the RBI has also imposed a monetary penalty of Rs 55 lakh on Visakhapatnam Co-operative Bank for violation with directions issued under Income Recognition, Asset Classification, Provisioning and other related matters along with norms pertaining to finance for housing schemes. It has also penalised Telangana based Darussalam Co-operative Urban Bank with Rs 10 lakh and Kerala-based Ottapalam Co-operative Urban Bank with Rs 5 lakh for violating similar norms.
Additionally, the central bank has penalised Tamil Nadu-based Bharat Heavy Electricals Employees’ Co-operative Bank with Rs 10 lakh for non-compliance with directions issued under Exposure Norms and Statutory or Other Restrictions.
Based on all the violations, a notice was issued to each bank separately advising them to show cause as to why penalty should not be imposed for the said violation, said the RBI. After considering the banks’ reply to the notice and submissions made during the personal hearing, the RBI came to the conclusion that the monetary penalty was warranted.
All these actions are based on deficiencies in regulatory compliance and are not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers, the central bank said.
The RBI has been tightening its grip on regulated entities, specifically cooperative banks, to ensure that appropriate corporate governance practices and regulations are followed.
The bankruptcy of erstwhile Punjab & Maharashtra Cooperative Bank (PMC) had prompted the regulator to announce tighter regulations and increase scrutiny for these lenders.On July 20, an RBI committee had recommended a four-tier regulatory framework for urban cooperative banks (UCBs) based on the size of deposits and their area of operations.