By order dated June 29, 2023, the Reserve Bank of India (RBI) imposed a penalty of Rs. 1 lakh (one lakh only) on Mumbai’s Konkan Mercantile Co-operative Bank Limited for failure to comply with RBI’s instructions regarding the maintenance of deposit accounts.
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 customers.
The fact is that the Reserve Bank of India performed a mandated inspection of the bank with regard to its financial situation as of March 31, 2021, and examined the risk assessment report and all related documentation.
The inspection revealed that the bank was maintaining minimum balances in saving bank accounts with fixed penalties rather than proportionate to the amount of the shortfall and without providing notice that penalties would apply if the minimum balance was not restored in the account within a month of the notice date.
A notice was sent to the bank in response to this and instructed to provide a justification for not imposing a fine for failing to maintain deposit accounts in accordance with RBI guidelines.
After analysing the bank’s written response to the notification, the apex bank determined that the aforementioned accusation of failing to follow RBI instructions was proved and ordered the implementation of a financial penalty.
This fine has been imposed in retaliation for the bank’s failure to follow the instructions given by Reserve Bank of India under Section 47A (1)(c) read in conjunction with Section 46(4)(i) and Section 56 of the Banking Regulation Act, 1949.
On the same date, the Reserve Bank of India has imposed a penalty of Rs. 2.20 crores on Indian Overseas Bank.
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