RBI imposes ₹3 lakh penalty on Shirpur Peoples' Co-operative Bank in Maharashtra

The Reserve Bank of India (RBl) has imposed a monetary penalty of Rs 3 lakh on the Shirpur Peoples' Co-operative Bank, Shirpur, in Maharashtra for contravention of or non-compliance with certain directions issued by the central bank.

The penalty

This penalty has been imposed in the exercise of powers vested in RBI under the provisions of the Banking Regulation Act, 1949, taking into account the failure of the bank to adhere to the aforesaid directions issued by the central bank.

The RBI stated that this action is based on regulatory compliance deficiencies and is not intended to rule on the validity of any transaction or agreement entered into by the bank with its customers.

These RBI directions were to urban cooperative banks (UCBs) on 'Exposure Norms and Statutory / Other Restrictions - UCBs', Income Recognition and Asset Classification (IRAC) and Know Your Customer (KYC), according to the central bank's statement released on Monday evening.

The inspection report of the of bank based on its financial position as on March 31, 2019, and as on March 31, 2020, revealed that the bank had had sanctioned advances to a group of borrowers above permissible limit, had not complied with Income Recognition and Asset Classification (IRAC) norms.

And the bank also did not have a robust software to identify and monitor suspicious transactions, in contravention of/non-compliance with the aforesaid directions issued by RBI.

RBI notice

Based on this, the RBI issued a notice to the bank asking it to provide justification for not imposing a fine for failing to follow the instructions.

The Reserve Bank of India (RBI) determined that the aforementioned allegations of non-compliance with its directions were substantiated and called for the imposition of a monetary penalty after taking into account the bank's responses, oral arguments made during the personal hearing, and further arguments made afterward.