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RBI imposes Rs 58-lakh penalty on Abhyudaya Co-op Bank


Money & Banking

Non-compliance with its directions on placement of deposits with other banks, and reporting of fraud, cited as reasons for the penalty

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹58 lakh on Mumbai-based Abhyudaya Co-operative Bank for non-compliance with its directions on ‘Placement of Deposits with Other Banks’, and ‘Monitoring and Reporting Mechanism of Frauds’, among others.

The central bank, in a statement, also cited non-compliance with its directions relating to  ‘Income Recognition, Asset Classification, Provisioning and Other Related Matters (IRAC norms)’ and ‘Management of Advances’ as the reasons for imposition of penalty.

The central bank had conducted the statutory inspection of the urban co-operative bank (UCB) with reference to its financial position as on March 31, 2019.

The Inspection Report and examination of all related correspondence revealed, inter alia, non-compliance with the directions issued by RBI, the statement said.

Non-compliance with the RBI directions was to the extent the bank accepted fresh deposits from other non-scheduled UCBs despite not meeting the criteria for doing so and had also not phased out 100 per cent of the existing deposits of UCBs by March 31, 2019; and reported a fraud with a delay of 942 days, according to the background given by RBI.

Further, the UCB failed to classify certain loan accounts as NPAs (non-performing assets) in line with IRAC norms; and failed to ensure end use of funds lent by it, the central bank said.

RBI said it had issued a notice to the bank advising it to show cause as to why penalty should not be imposed for contravention of its RBI directions

“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 charge of non-compliance with the RBI directions was a substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with such directions,” according to the statement.

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, it added.

Published on May 09, 2022

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