RBI Fines Three Cooperative Banks for Rule Violations

The Reserve Bank of India (RBI) has imposed monetary penalties totalling ₹17.30 lakh on three cooperative banks — two from Maharashtra and one from Odisha — for non-compliance with its directives.

Banks and Penalty Details

The central bank levied a penalty of ₹6.30 lakh on the Vaishya Sahakari Bank Limited, based in Mumbai, Maharashtra. The RBI also fined the Islampur Urban Co-operative Bank Limited, located in Islampur, Maharashtra, ₹6 lakh. The third bank penalised is the Kalinga Mahila Urban Co-operative Bank Limited, based in Bhubaneswar, Odisha, which was fined ₹5 lakh.

The penalties were imposed under the provisions of the Banking Regulation Act, 1949. The RBI stated that the actions were based on deficiencies in regulatory compliance and not on the validity of any transaction or agreement entered into by the banks with their customers.

Reasons for Penalty

For Vaishya Sahakari Bank, the RBI found that the bank had not complied with directions related to the classification and valuation of its investment portfolio. Specifically, the bank failed to adhere to the prescribed norms for recognising non-performing assets (NPAs) and making provisions for them.

In the case of Islampur Urban Co-operative Bank, the RBI identified violations concerning the sanctioning of loans. The bank had granted loans to directors and their relatives, which is prohibited under the Banking Regulation Act. It also failed to maintain the prescribed statutory liquidity ratio (SLR) on certain days.

For Kalinga Mahila Urban Co-operative Bank, the RBI noted non-compliance with directions on the maintenance of cash reserve ratio (CRR) and SLR. The bank also failed to adhere to the board-approved policy for loan recovery.

Regulatory Action

The RBI clarified that these penalties are not intended to pronounce upon the validity of any transaction or agreement between the banks and their customers. The central bank said the actions are based on supervisory findings and the banks' responses to show-cause notices.

The penalties were imposed after considering the banks' replies, oral submissions, and additional documents. The RBI added that the banks have been advised to take corrective measures to ensure compliance with all regulatory directions.

This is not the first time the RBI has penalised cooperative banks for rule violations. The central bank has been tightening its oversight of the cooperative banking sector, which has faced several governance and compliance issues in recent years.

The RBI continues to monitor compliance through its inspection and supervision mechanism. Banks found violating norms face monetary penalties and other corrective actions as per law.