RBI imposed Monetary Penalty on Sahkari Bank; Know Why?

The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs.2.00 lakh on Baran Nagrik Sahkari Bank Ltd., Baran, Rajasthan (the bank) for contravention of Section 35 A read with Section 56 of the Banking Regulation Act, 1949. This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949, by an order dated April 18, 2023.

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 bank’s inspection report based on its financial position as of March 31, 2021 revealed, among other things, that the bank was not in compliance with RBI Directions prohibiting the grant of loans/advances/any other financial accommodation to relatives of its directors and failing to report the same in OSS-6 returns to RBI, in violation of Section 35 A read with Section 56 of the Banking Regulation Act, 1949. Based on this, a Notice was given to the bank, directing it to show cause why a penalty should not be levied for failure to comply with the stated directions.

After reviewing the bank’s response, the RBI concluded that the aforementioned charge of non-compliance with RBI orders was proved and warranted the application of monetary penalties.