RBI imposes penalty on 2 co-operative banks in Tamil Nadu and Karnataka

RBI has imposed a monetary penalty of Rs. 15 lakh on two co-operative banks, including Millath Co-operative Bank, Davangere (Karnataka) and The Thiruvaikuntam Co-operative Urban Bank Limited, Thoothukudi (Tamil Nadu).

Issuing a statement, the RBI said, “A penalty of Rs. 10 lakh has been imposed on Millath Co-operative Bank for non-adherence/violation of all inclusive directions and other directions imposed on the bank.”

In another statement, the central bank said a monetary penalty of Rs. 5 lakh has been imposed on the Tamil Nadu Co-operative Bank for contravention of the directions issued by the RBI on prohibition of loans and advances to directors.

In both the above cases, the penalty has been imposed based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers, the statement read.

RBI said the inspection report of Millath Co-operative Bank, based on its financial position as on 31 March last year, revealed inter alia, violation/non-compliance with the directions on permitting of withdrawals in excess of the stipulated amount and sanctioning of fresh loans and advances in violation of directions issued under Supervisory Action Framework (SAF).

Meanwhile, the inspection report of The Thiruvaikuntam Co-Operative Urban Bank, based on its financial position as on 31 March, 2019, revealed that the bank had sanctioned loans to its directors in contravention with the directions issued by RBI in this regard.

Notices were issued to both the co-operative banks. The RBI further added, “After considering their replies and oral submissions made during the personal hearing, RBI came to the conclusion that the charges of non-compliance with directions were substantiated and warranted imposition of monetary penalty.”