Gujarat based Multi State Scheduled Bank- Mehsana Urban Cooperative Bank, which has been slapped with a hefty fine by the regulator RBI, thinks that the PMC Bank episode has made people and RBI suspicious towards the urban cooperative banking sector.
In an interview given to Indian Cooperative, Bank’s Chairman Ganpatbhai K Patel felt that RBI has become somewhat extra-cautious in the wake of the PMC Scam. “At times there are issues which should not evoke such strong response from the RBI”, he said almost under the breath.
Patel, however admits that the bank has violated the RBI norms due to which the apex bank slapped a penalty of Rs 5 crore on the bank.
Readers would recall that The Reserve Bank of India (RBI) has, by order dated November 04, 2019, imposed monetary penalty of ?5 Crore on The Mehsana Urban Co-operative Bank Ltd., Mehsana, Gujarat (the bank) for contravention of the directions issued by RBI on ‘Loans and Advances to Directors, Relatives and Firms/Concerns in which they are Interested’, and non-compliance with the Master Directions on ‘Know Your Customer (KYC)’.
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, 1949 for failure of the bank to adhere to the aforesaid directions issued by RBI.
“This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers”, the RBI release reads.
Talking to this correspondent on the phone Patel said, “Several years back, we had taken over the ailing bank- Surat Nagrik Sahakari Bank leading to stress in the parent bank. The issue of KYC as flagged by the RBI is not untrue though”, Patel was candid. “We have fixed the issue now but we still have to pay the fine”, he added.
On the issue of RBI finding the UCB guilty of violating the directions on loans and advances to Directors, Relatives and firms/concerns, the Chairman admitted that UCB has erred on some technical parameters. “But we have informed RBI that the issues have been rectified now”, he asserted.
It is to be noted that last year also RBI imposed penalty of Rs 1 crore on Mehsana Urban Cooperative Bank. The UCB was again found guilty of violation of RBI directives relating to grant of advances to directors and their relatives but bank had not learnt anything from this.
Mehsana Urban Cooperative Bank was established on 23rd October 1983 and is one of the leading UCBs of Gujarat. As on 31st March 2019, bank had a deposit base of Rs 5359 crore and advances of Rs 3667 crore. Bank earned a net profit of Rs 67.03 crore in last FY i.e. 2018-19.