In a recent move, the Reserve Bank of India (RBI) has levied a penalty of Rs 7.00 lakh on Navsarjan Industrial Co-operative Bank Ltd., located in Ankleshwar, District Bharuch, Gujarat. The penalty, mandated through an order dated December 14, 2023, is a consequence of the bank’s failure to adhere to RBI directives related to ‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (UCBs),’ ‘Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016,’ and a breach of ‘Section 26A (2) read with Section 56 of the Banking Regulation Act, 1949 (BR Act).’
The imposition of the penalty is in line with the powers granted to RBI under Section 47A(1)(c) in conjunction with Sections 46(4)(i) and 56 of the BR Act.
It is crucial to note that this regulatory action is focused on deficiencies in compliance and does not pass judgment on the legitimacy of any transactions or agreements between the bank and its customers.
The penalty is a result of the statutory inspection conducted by RBI regarding the financial position of the bank as of March 31, 2022. The inspection revealed various issues, including a breach of inter-bank gross and counterparty exposure limits, failure to review risk categorization of accounts as prescribed, and non-transfer of the eligible amount to the Depositor Education and Awareness Fund.
After reviewing the Inspection Report, Risk Assessment Report, and related correspondence, RBI issued a notice to the bank, prompting it to explain why a penalty should not be imposed for the failure to comply with the mentioned directions and provisions of the BR Act.
Following the bank’s response to the notice and oral submissions during the personal hearing, RBI concluded that the charges of non-compliance were substantiated, necessitating the imposition of a monetary penalty on Navsarjan Industrial Co-operative Bank Ltd.
