RBI imposed Monetary Penalty on Co-operative Apex Bank; Know Why?:

RBI imposed Monetary Penalty on Co-operative Apex Bank; Know Why? The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs.23.23 lakh on The Karnataka State Co-operative Apex Bank Ltd. (the bank), for non-compliance with the Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016 as well as directions issued by RBI on ‘Membership of Credit Information Companies (CICs)’, by an order dated April 11, 2023. This penalty was issued in accordance with the powers delegated to the RBI by sections 47A (1) (c) read in conjunction with sections 46 (4) (i) and 56 of the Banking Regulation Act, 1949, and section 25(1)(iii) read in conjunction with section 23(4) of the Credit Information Companies (Regulation) Act, 2005. This action is based on regulatory compliance problems and is not intended to call into question the legitimacy of any transaction or agreement entered into by the bank with its clients. The statutory inspection of the bank conducted by NABARD with reference to the bank's financial position as of March 31, 2020, and examination of the Inspection Report as well as correspondence pertaining thereto revealed, inter alia, that during the financial year 2019-20, the bank did not (i) undertake risk categorization of customers; (ii) implement any robust software as part of effective identification and reporting of suspicious transactions; and (iii) submit any risk categorization of customers. In addition, a notice was sent to the bank, instructing it to show cause why a penalty should not be levied on it for failing to comply with the statutory directions, as indicated therein. After considering the bank’s reply to the notice, its additional submissions and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty.