RBI Penalises Five Co-operative Banks For Rule Violations

The Reserve Bank of India (RBI) announced on 26 March that it has levied monetary penalties on five cooperative banks for rule violations. The banks facing penalties include Mathura Jilla Sahkari Bank, Solapur Janata Sahakari Bank, The Janalaxmi Co-operative Bank, Chikkamagaluru District Cooperative Central Bank and The Dindigul Urban Co-operative Bank.

According to the RBI, Mathura Jilla Sahkari Bank has been fined Rs 1 lakh, The Janalaxmi Co-operative Bank Rs 59.90 lakh, Solapur Janata Sahakari Bank Rs 28.30 lakh, The Dindigul Urban Co-operative Bank Rs 25,000 and Chikkamagaluru District Cooperative Central Bank Rs 50,000.

The penalty on Solapur Janata Sahakari Bank was imposed because the bank appointed a member to its Board of Management who did not meet the 'Fit and Proper' criteria and it failed to reconstitute the Board within the specified time despite RBI's directives. Additionally, the bank violated prohibitory orders/directions under SAF by sanctioning fresh loans carrying risk weights exceeding 100 percent during FY 2021-22.

The Janalaxmi Co-operative Bank faced penalties for its failure to constitute a Board of Management within the extended timeline granted by RBI, exceeding the prescribed limit while sanctioning credit facilities to nominal members, and offering higher interest rates on term deposits compared to those offered by the State Bank of India for the same tenor.

The RBI conducted a statutory inspection of Mathura Jilla Sahkari Bank's financial position as of 31 March 2021, through the National Bank for Agriculture and Rural Development (NABARD). The inspection revealed non-compliance with statutory provisions and related correspondence. Subsequently, the RBI issued a notice to the bank, prompting an investigation. It was found that the bank failed to dispose of an immovable property not being used for its purposes within the stipulated period under the Banking Regulations Act.

The RBI emphasised that this action is a result of regulatory compliance deficiencies and does not imply judgment on the validity of any transactions or agreements between the banks and their customers.