RBI Imposes Monetary Penalty on a Co-operative Bank; Check Reason

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹6.00 lakh (Rupees Six lakh only) on Shri Chhatrapati Rajarshi Shahu Urban Co-operative Bank Limited, Beed, (M.H.) (the bank) for contravention of/ non-compliance with the directions issued by RBI to Urban Cooperative Banks on Frauds – Classification and Reporting by an order dated July 15, 2022.

This fine has been imposed in retaliation for the bank’s failure to follow the aforementioned instructions given by RBI under Section 47A (1)(c) read in conjunction with Section 46(4)(i) and Section 56 of the Banking Regulation Act, 1949.

This action is based on regulatory compliance issues, and it is not meant to rule on the legality of any agreements or transactions the bank has with its clients.

Background

The inspection report of the bank based on its financial position as on March 31, 2020, revealed, inter alia, that the bank had delayed in reporting of frauds to RBI in contravention of/ non-compliance with the directions issued by RBI on Frauds – Classification and Reporting. Based on the same, a Notice was issued to the bank advising it to show cause as to why penalty should not be imposed for non-compliance with the directions.

After considering the bank’s replies, oral submissions made during the personal hearing and additional submissions made by the bank, RBI came to the conclusion that the aforesaid charge of non-compliance with the RBI directions was substantiated and warranted imposition of monetary penalty.