Monetary Penalty of Rs.7 Lakh levied on Navsarjan Industrial Co-operative Bank; Know Why?

The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs.7.00 lakh on Navsarjan Industrial Co-operative Bank Ltd., Ankleshwar, dist. Bharuch, Gujarat (the bank) for non-compliance with the directions issued by RBI on ‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (UCBs)’, ‘Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016’ and contravention of ‘Section 26A (2) read with Section 56 of the Banking Regulation Act, 1949 (BR Act)’.

The RBI’s statutory inspection of the bank with reference to its financial position as of March 31, 2022, and examination of the Inspection Report, Risk Assessment Report, and all correspondence related thereto revealed, inter alia, that the bank had (i) breached inter-bank gross and counterparty exposure limits, (ii) not carried out review of risk categorization of accounts as per prescribed periodicity, and (iii) not transferred eligible amount to Depositor E. As a result, a notice was sent to the bank instructing it to show cause why a penalty should not be imposed for failure to comply with the aforementioned directions and requirements of the BR Act, as specified therein.

After considering the bank’s reply to the notice and oral submissions made by it during the personal hearing, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions and provisions of the BR Act was substantiated and warranted imposition of monetary penalty on the bank.

This penalty was levied in accordance with the authority provided on the RBI by Section 47A(1)(c), read in conjunction with Sections 46(4)(i) and 56 of the BR Act.

This action is based on shortcomings in regulatory compliance and is not intended to rule on the legitimacy of any transaction or agreement entered into by the bank with its clients.