In a regulatory move, the Reserve Bank of India (RBI) has levied a monetary penalty of ₹3.00 lakh on Indrayani Co-operative Bank Ltd., located in Pimpri, Maharashtra. This penalty, which was ordered on September 25, 2023, is a result of the bank’s failure to comply with RBI’s directives on ‘Income Recognition, Asset Classification, Provisioning, and Other Related Matters – UCBs’ and ‘Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016’. The imposition of this penalty is exercised under the powers granted to RBI by the provisions of section 47-A (1) (c) along with Sections 46 (4) (i) and 56 of the Banking Regulation Act, 1949.
It’s essential to note that this penalty is specifically linked to regulatory non-compliance and does not render judgment on the validity of any transactions or agreements between the bank and its customers.
Background
RBI’s statutory inspection of the bank, based on its financial status as of March 31, 2022, and a thorough examination of the Inspection Report, Risk Assessment Report, and related correspondence, unveiled several deficiencies in regulatory compliance. Notably, the bank failed to adhere to the Prudential Norms concerning Income Recognition, Asset Classification, and Provisioning. Additionally, the bank had not established a system for the periodic update of Know Your Customer (KYC) information for its customers.
In response to these findings, the bank received a notice from RBI, requiring it to explain why a penalty should not be imposed for its failure to comply with the aforementioned directions.
Following the bank’s response to the notice and the oral submissions presented during a personal hearing, RBI determined that the charges of non-compliance with the stipulated RBI directions were well-founded. Consequently, the monetary penalty on the bank was deemed necessary.
