The Reserve Bank of India (RBI) has imposed monetary penalties on three cooperative banks for various regulatory and statutory violations, with director-related loans emerging as a common compliance issue in two of the cases.
The highest penalty of Rs 5 lakh was imposed on The Citizens Urban Cooperative Bank Ltd., Jalandhar, Punjab, for violating RBI’s exposure norms and cyber security framework. The bank had sanctioned loans beyond the permissible limit to certain nominal members and failed to implement two-factor authentication for access to its Core Banking Solution (CBS).
The RBI also imposed a Rs 1 lakh penalty on the Chikmagalur District Co-operative Central Bank Ltd., Karnataka, after NABARD’s inspection found that the bank had sanctioned director-related loans, violating provisions of the Banking Regulation Act.
Similarly, Sri Bharathi Co-operative Urban Bank Ltd., Hyderabad was fined Rs 1.50 lakh for sanctioning director-related loans and failing to maintain the mandated level of small value loans, which should constitute at least 40% of its aggregate loans and advances.
Notably, director-related lending featured in two of the three RBI enforcement actions, underscoring the central bank’s continued focus on preventing conflicts of interest and strengthening governance standards in the cooperative banking sector.
The RBI clarified that the penalties are based on deficiencies in regulatory and statutory compliance and do not affect the validity of transactions entered into by the banks with their customers. The central bank also noted that the monetary penalties are without prejudice to any further action that may be initiated against the banks.