In a recent enforcement action, the Reserve Bank of India (RBI) has levied penalties totaling ₹7.95 lakh on four cooperative banks and GPT Sons Pvt Ltd for non-compliance with regulatory directives. The highest penalty of ₹3 lakh was imposed on Kapadwanj Peoples Cooperative Bank Ltd, based in Gujarat.
Entities Penalized and Reasons for Penalties
1. Kapadwanj Peoples Cooperative Bank Ltd (Gujarat)
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- Penalty Amount: ₹3 lakh
- Violations:
- Failure to transfer eligible unclaimed amounts to the Depositor Education and Awareness Fund (DEAF) within the prescribed timeframe.
- Acceptance of interest-free deposits in accounts other than current accounts.
- Opening savings accounts for institutions whose entire income was not exempt from income tax.
- Neglecting to update Know Your Customer (KYC) information and review account risk categorization as per the required periodic schedule.
2. Lunawada Nagrik Sahakari Bank Limited (Gujarat)
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- Penalty Amount: ₹2.10 lakh
- Violations:
- Non-compliance with directions regarding cooperative banks’ membership in Credit Information Companies (CICs).
- Operating outside the authorized area.
- Opening or upgrading extension counters and Automated Teller Machines (ATMs) without prior approval.
- Failure to submit credit information of borrowers to three CICs.
- Opening an on-site ATM without prior approval.
- Neglecting to carry out risk-based KYC updates and review the risk categorization of accounts as per the prescribed periodicity.
3. Kheda People’s Cooperative Bank Ltd (Gujarat)
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- Penalty Amount: ₹1.50 lakh
- Violations:
- Non-compliance with KYC norms.
- Failure to conduct risk-based periodic KYC updates.
- Neglecting to review the risk categorization of accounts as per the required schedule.
4. Anandeshwari Nagrik Sahkari Bank Maryadit (Madhya Pradesh)
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- Penalty Amount: ₹1 lakh
- Violations:
- Non-compliance with directions on exposure norms and statutory or other restrictions.
- Granting loans to relatives of directors without adhering to the prescribed guidelines.
5. GPT Sons Pvt Ltd (West Bengal)
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- Penalty Amount: ₹35,000
- Violations:
- Non-compliance with directions on the submission of credit information to CICs.
- Failure to submit data to any of the CICs.
Implications of the Penalties
The RBI’s enforcement actions underscore the critical importance of adherence to regulatory norms by financial institutions. Non-compliance can lead to penalties, reputational damage, and erosion of customer trust. These penalties serve as a reminder to all cooperative banks and financial entities to:
- Ensure Timely Compliance: Adhere to all regulatory directives, including timely submission of required information to regulatory bodies and CICs.
- Strengthen Internal Controls: Implement robust internal control mechanisms to monitor compliance and prevent lapses.
- Enhance KYC Procedures: Regularly update KYC information and conduct periodic reviews of account risk categorization to mitigate risks associated with money laundering and fraud.
- Seek Necessary Approvals: Obtain requisite approvals before expanding operations, such as opening new branches or ATMs, to ensure compliance with regulatory guidelines.
Conclusion
The RBI’s recent penalties highlight the regulator’s commitment to maintaining the integrity of the financial system. Financial institutions must prioritize compliance and governance to uphold customer trust and ensure sustainable operations. Proactive measures, including regular audits, staff training, and adherence to best practices, are essential to navigate the complex regulatory landscape effectively.
