The Reserve Bank of India (RBI) has, by an order dated January 11, 2022, imposed a monetary penalty of ₹4.00 lakh (Rupees four lakh only) on The Co-operative Bank of Rajkot Ltd., Rajkot (Gujarat) (the bank) for contravention of directions issued by RBI on ‘Loans and advances to directors, relatives and firms/concerns in which they are interested’. This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47A(1)(c) read with Section 46(4)(i) and Section 56 of the Banking Regulation Act, 1949, taking into account the failure of the bank to adhere to the aforesaid directions issued by RBI.
This action was based on deficiencies in regulatory compliance and was not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.
The statutory inspection of the bank conducted by the 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, that the bank had sanctioned loans to the firms in which a relative of bank’s director was interested, resulting in non-compliance with aforesaid directions issued by RBI. 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 non-compliance with the aforesaid directions issued by the RBI. After considering the bank’s reply to the notice and oral submissions made during the personal hearing, the RBI came to the conclusion that the aforesaid charge was substantiated and warranted the imposition of monetary penalty.
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