The Reserve Bank of India has imposed a monetary penalty of Rs fifty-eight lakh on the Abhyudaya Co-operative Bank. Abhyudaya Bank is said to be the third-largest UCB, after Saraswat Bank and Cosmos Bank.
Though the UCB has yet not made public its figure for the financial year that ended 31st March 2022, Abhyudaya Cooperative Bank had failed to perform well on several financial parameters in the 2020-21 FY.
In the present case Abhyudaya Co-operative Bank was found guilty of non-compliance with the directions issued by RBI on ‘Placement of Deposits with Other Banks’, ‘Monitoring and Reporting Mechanism of Frauds’, ‘Income Recognition, Asset Classification, Provisioning and Other Related Matters (IRAC norms)’ and ‘Management of Advances’.
This action is based on deficiency 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, clarifies the RBI.
In a press release RBI says “The statutory inspection of the bank conducted by RBI with reference to the bank’s financial position as on March 31, 2019, the Inspection Report pertaining thereto and examination of all related correspondence revealed, inter alia, non-compliance with the aforesaid directions issued by RBI to the extent the bank (i) accepted fresh deposits from other non-scheduled UCBs despite not meeting the criteria for doing so and had also not phased out 100% of the existing deposits of UCBs by March 31, 2019, (ii) reported a fraud with a delay of 942 days, (iii) failed to classify certain loan accounts as NPAs as per IRAC norms, and (iv) failed to ensure end use of funds lent by it.”
In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for contravention of the RBI directions, as stated therein.
After considering the bank’s reply to the notice, oral submissions made during the personal hearing and examination of additional submissions made by it, RBI came to the conclusion that the aforesaid charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with such directions.
In these columns in the past, we featured the story of the Abhyudaya Cooperative Bank and narrated how Sitaram C. Ghandat, whose son now calls shots, founded the UCB.
Ghandat was a peon in Maharashtra Assembly but later became its member (MLA) as he was elected on independent ticket thrice.
Setting up the bank in the Jhopadpatti of Ambabadi in Mumbai in 1965, he struggled to collect even Rs 10 in the beginning. Today due to his and his team’s hard labour, the bank figures in the first five UCBs in the country.