RBI imposes Monetary Penalty on Shillong Co-operative Urban Bank for violation of RBI Directions

The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs.1 lakh on Shillong Co-operative Urban Bank Limited, Meghalaya (the bank) for non-compliance with the directions issued by RBI on ‘Know Your Customer (KYC) Directions, 2016’.

The RBI’s statutory inspection of the bank with reference to its financial position as of March 31, 2023, as well as an examination of the Inspection Report, Risk Assessment Report, and all correspondence related thereto, revealed, among other things, that the bank had (i) failed to implement a system of account risk categorisation, and (ii) failed to conduct periodic KYC updates on customer accounts.

As a result, a notice was issued to the bank, urging it to show cause why a penalty should not be imposed for noncompliance with the aforementioned orders.

After considering the bank’s response to the notice, additional submissions made by it, and oral submissions made during the personal hearing, the RBI concluded that the charge of non-compliance with the aforementioned RBI directions was supported and warranted the imposition of a monetary penalty on the bank.

This penalty has been imposed in the exercise of powers conferred on RBI under Section 47A (1) (c) read with Sections 46(4) (i) and 56 of the Banking Regulation Act, 1949.

This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.