The Reserve Bank of India (RBI) has imposed a penalty on the Urban Co-operative Bank Ltd on grounds of deficiencies in the regulatory compliance. The RBI, by an order dated May 29, 2023, imposed a monetary penalty of ₹3.00 lakh (Rupees Three lakh only) on Sawantwadi Urban Cooperative Bank Ltd.
The Sawantwadi Urban Cooperative Bank Ltd. contravened the directions contained in the Supervisory Action Framework (SAF) issued by RBI under section 36 (1) read with section 56 of the Banking Regulation Act, 1949.
This action is taken because of a bank’s lack of regulatory compliance and is not meant to judge the legality of any agreements or transactions that the bank has with its customers.
The background is that, despite SAF restrictions, the bank had sanctioned new loans and advances that were not in the permitted category and had offered interest rates on term deposits that were higher than those provided by State Bank of India.
This was revealed during the bank’s statutory inspection by the RBI with regard to its financial position as of March 31, 2022, and examination of the Risk Assessment Report and all related correspondence pertaining to the same.
The penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47A(1)(c) read with Section 46(4)(i) and Section 56 of the Banking Regulation Act, taking into account the failure of the bank to adhere to the aforesaid directions issued by RBI.
A notification was sent to the bank in response to this, instructing it to provide justification for not imposing a fine for violating the RBI’s Supervisory Action Framework directives.
The RBI determined that the aforementioned charge of non-compliance with RBI directions was proved and warranted imposition of a monetary penalty after taking into account the bank’s written response to the notice.
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