The Reserve Bank of India (RBI) has penalised eight Indian cooperative banks and cancelled the certificates of registration of six non-banking financial companies. 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.
The reasons for such strict action are varied. Following is what the banks and NBFC did to invite the action:
1. The RBI imposed a penalty of Rs 2.33 crore on an NBFC called Spandana Sphoorty Financial. The penalty is the highest among the entities fined. The NBFC had failed to abide by guidelines and regulations on the pricing of credit. The Hyderabad-based company became the largest microfinance institution in India and the sixth-largest globally in 2003 within five years of its establishment.
2. The RBI penalised Mehsana Urban Co-operative Bank of Rs 40 lakh, which is based in Gujarat and has a few branches in Maharashtra. The bank did not pay interest on various term deposits including deposits that matured on Sundays, holidays or non-business working days. It made the payments on the next working day without adding interest for the intervening days.
The bank did not pay interest on unclaimed term deposits for the period after maturity either. It did not pay interest on the balance amount in current accounts of deceased individual depositors or proprietorship concerns from the date of their death to the date of repayment to their claimants.
3. The RBI fined Indapur Urban Cooperative Bank Rs 7 lakh for violating exposure norms. The bank had granted unsecured advances, breaching the aggregate ceiling for such advances.
4. The RBI imposed a penalty of Rs 1 lakh on the Nagpur-based Warud Urban Co-operative Bank for violating Know Your Customer (KYC) norms. The bank did not comply with the prudential inter-bank counterparty limit. Furthermore, there was insufficient technological infrastructure for effective identification and reporting of suspicious transactions.
5. The RBI asked Jila Sahakari Kendriya Bank Maryadit to pay a penalty of Rs 1 lakh for failing to abide by KYC regulations. This bank delayed the submission of statutory or OSS returns to RBI and NABARD. It did not carry out periodic reviews of risk categorisation of its customers either.
The bank did not make periodic updates on the KYC of its customers. This bank based in Madhya Pradesh usually finances primary agriculture cooperative societies in four districts.
6. The RBI fined Yavatmal Urban Co-operative Bank for not conforming to KYC regulations as mandated by the RBI, which levied a monetary penalty of Rs 3.5 lakh. It made no periodic review of risk categorisation or regular update of KYC details.
7. The RBI imposed a penalty of Rs 1 lakh on Garha Co-operative Bank for contravention and non-compliance with directions on income recognition and asset classification. In June, the RBI had extended the directions for a period of three months from 25 May 2022, to 24 August 2022 for the bank. The directions included certain restrictions and/or ceilings on the withdrawal/acceptance of deposits.
8. The RBI imposed a penalty of Rs 2.51 lakh on Goa State Co-operative Bank for not disposing 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. The RBI slapped Chhattisgarh Rajya Sahakari Bank with a penalty of Rs 25 lakh for violating KYC regulations. The bank had received a licence from the RBI in 2010 while it has been in the banking business since 2000.