RBI Has Charged Monetary Penalty On 2 Banks: Violating Banking Norms
India’s central bank, the Reserve Bank of India (RBI), has charged 2 banking institutions, Andaman and Nicobar State Co-operative Bank Limited, and Hissar Urban Co-operative Bank Limited, with a monetary penalty for not adhering to the banking regulations.
Andaman and Nicobar State Co-operative Bank Limited:
The Reserve Bank of India (RBI) announced Monday that it had fined Andaman and Nicobar State Co-operative Bank Limited INR 5 Lakh for failing to comply with some banking norms. The bank was found to have violated or fallen short of the requirements of Section 20 read with Section 56 of the Banking Regulation (BR) Act, 1949 (As Applicable to Cooperative Societies – AACS) when it approved unsecured loans to its directors, according to the inspection report of Andaman and Nicobar State Co-operative Bank Limited based on its financial position as of 31st March 2019. Regarding this, the bank sent a directive asking it to justify not imposing a fine for failing to follow the instructions.
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This fine has been charged in retaliation for the bank’s negligence in following the norms above given by the Reserve Bank of India (RBI) under Section 47A (1)(c) read in conjunction with Section 46(4)(i) as well as Section 56 of the BR Act, 1949. The RBI stated that this measure is about regulatory compliance shortcomings and is not meant to rule on the legality of any transactions or arrangements made by the bank with its clients.
Hissar Urban Co-operative Bank Limited:
The Reserve Bank of India (RBI) had fined the Hissar Urban Cooperative Bank Limited INR 3 Lakh through an order dated 23rd September 2022. According to the bank’s inspection report on its financial position as of 31st March 2021, violations of Sections 35A and 36(1) read with Section 56 of the BR Act, 1949 were among the findings. When the bank provided interest rates on savings deposits that did not follow the instructions, the RBI’s Supervisory Action Framework directives were not followed by it. With regards to this, a directive was sent to the bank asking it to justify not being penalized for violating the particular instructions given by the central bank.
This fine was levied by the authority granted to the Reserve Bank of India (RBI) under Sections 47A(1)(c), 46(4)(i), and 56 of the BR Act of 1949. This measure concerns regulatory compliance issues and is not meant to rule on the legality of any agreements or transactions the bank has with its clients.
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