The Reserve Bank of India (RBI) took the following decisions from September 21- 25, 2023:
RBI approves merger of Sahebrao Deshmukh Co-op Bank with Cosmos Co-op Bank
On September 25, 2023, RBI in exercise of its power conferred under Sub-Section (4) of Section 44A read with Section 56 of the Banking Regulation (BR) Act, 1949 sanctioned the Scheme of amalgamation of The Sahebrao Deshmukh Co-operative Bank Ltd., Mumbai, Maharashtra with The Cosmos Co-operative Bank Limited, Pune, Maharashtra.
- The Scheme will come into force with effect from 26th September 2023.
- Following the amalgamation, the branches of The Sahebrao Deshmukh Co-operative Bank Ltd will function as branches of The Cosmos Co-operative Bank Limited with effect from 26th September 2023.
RBI imposes penalty on SBI, Indian Bank, Punjab & Sind Bank
On September 21, 2023, RBI imposed a monetary Penalty on the State Bank of India (SBI), Indian Bank, an Punjab & Sind Bank in exercise of it powers conferred under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 51(1) of the BR Act.
However, these penalties will not make any kind of effect on any transaction or agreement of bank with its customers.
Penalty on SBI: Rs 1.30 Crore
RBI imposed a penalty of Rs 1.30 Crore on SBI for non-compliance with certain directions issued by RBI on ‘Loans and Advances – Statutory and Other Restrictions’ and ‘Guidelines on Management of Intra-Group Transactions and Exposures’.
The RBI’s Statutory Inspection for Supervisory Evaluation (ISE 2021) in 2021 found that the bank failed to comply with directions, including sanctioning a term loan without proper due diligence and exceeding intra-group exposure limits. Following the bank’s response and examination of the matter, RBI imposed a monetary penalty for substantiated non-compliance.
Penalty on Indian Bank: Rs 1.62 crore
RBI imposed a penalty of Rs 1.62 crore on Indian Bank for non-compliance with certain directions issued by RBI on ‘Loans and Advances – Statutory and Other Restrictions’, ‘Reserve Bank of India [Know Your Customer (KYC)] Directions, 2016’ and ‘Reserve Bank of India (Interest Rate on Deposits) Directions, 2016’.
During the RBI’s ISE 2021, several instances of non-compliance were discovered including sanctioning a term loan to a corporation without proper due diligence, leading to debt repayment issues, failing to close accounts opened through OTP (One Time Password)-based e-KYC (Know Your Customer) after one year without conducting customer due diligence etc. This led to the imposition of a monetary penalty on the bank.
Penalty on Punjab & Sind Bank: Rs 1 crore
RBI imposed a penalty of Rs 1 crore on Punjab & Sind Bank for non-compliance with the provisions of sub-section (2) of Section 26A of the BR Act, 1949 read with directions issued by RBI on ‘The Depositor Education and Awareness Fund Scheme, 2014-Section 26A of Banking Regulation Act, 1949-Operational Guidelines’.
During the 2021 RBI inspection, the bank was found to have failed to comply with provisions of the BR Act and RBI directions by not crediting the eligible amount to the Depositor Education and Awareness Fund within the prescribed timeframe under Section 26A of the BR Act. This led to the imposition of a monetary penalty on the bank.
RBI imposes Rs 8.80 Lakh penalty on Fedbank Financial Services Limited
RBI also imposed a penalty of Rs 8.80 Lakh on Fedbank Financial Services Limited, a Non-Banking Financial Company (NBFC) in Mumbai, for non-compliance with certain provisions of the Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016.
- This penalty has been imposed in exercise of powers conferred on RBI under the provisions of clause (b) of sub-section (1) of Section 58G read with clause (aa) of sub-section (5) of Section 58B of the RBI Act, 1934.
RBI cancels Kapol Co-operative Bank’s licence
On September 25, 2023, RBI has cancelled the licence of the Kapol Co-operative Bank Limited, Mumbai, Maharashtra amid inadequate capital and earning prospects. Following, it is immediately prohibited from conducting banking activities, including accepting and repaying deposits, as defined in Section 5 (b) read with Section 56 of the BR Act, 1949 with immediate effect.
Reasons behind Cancellation:
i.It does not comply with the provisions of Section 11(1) and Section 22 (3) (d) read with Section 56 of the BR Act, 1949.
ii.It also failed to comply with the requirements of Sections 22(3) (a), 22(3) (b), 22(3)(c), 22(3)(d) and 22(3)(e) read with Section 56 of the Banking Regulation Act, 1949;
iii.The bank’s continuation is detrimental to depositors, as its current financial position makes it unable to fully repay them, and harm public interest.
i.Approximately 96.09% of depositors are eligible to receive their full deposits from Deposit Insurance and Credit Guarantee Corporation (DICGC).
- It should be noted that in case of liquidation, depositors can claim up to Rs 5,00,000 from the DICGC)under the DICGC Act, 1961.
ii.As of July 24, 2023, DICGC has already paid Rs 230.16 crore to insured depositors based on their willingness to claim their deposits.
Recent Related News:
i.On July 5, 2023, RBI cancelled the banking licenses of two co-operative banks viz. Malkapur Urban Co-operative Bank Ltd(Malkapur UCB) based in Buldhana, Maharashtra, and Shushruti Souharda Sahakara Bank Niyamita(SSS Bank) based in Bengaluru, Karnataka.
ii.RBI cancelled the banking licence of two cooperative banks, Sri Sharada Mahila Co-operative Bank, Tumkur, Karnataka and Harihareshwar Sahakari Bank, Satara in Maharashtra.
About Reserve Bank of India (RBI):
Governor – Shaktikanta Das
Deputy Governors – Swaminathan Janakiraman, Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar
Establishment – 1st April 1935
Headquarters – Mumbai, Maharashtra