Bank Penalty: RBI imposed Penalty on these Two Banks for not providing DEAF Amount to Customer on Time

The Reserve Bank of India (RBI) has imposed monetary penalties of ₹5 lakh each on The Patiala Central Co-operative Bank Ltd., Patiala, Punjab, and The Panchkula Central Co-operative Bank Ltd., Haryana for failing to comply with statutory provisions under the Banking Regulation Act, 1949.

In two separate orders dated November 29, 2024, the central bank cited contraventions of Section 26A read with Section 56 of the Act, specifically regarding the banks’ failure to transfer eligible unclaimed amounts to the Depositor Education and Awareness Fund (DEAF) within the prescribed timeline.

RBI Imposes Monetary Penalties on Cooperative Banks in Punjab and Haryana

Penalty on The Patiala Central Co-operative Bank Ltd., Punjab

The Reserve Bank of India (RBI), through an order dated November 29, 2024, has imposed a monetary penalty of ₹5 lakh on The Patiala Central Co-operative Bank Ltd., Patiala, Punjab, for contravening provisions of Section 26A read with Section 56 of the Banking Regulation Act, 1949 (BR Act). This penalty has been levied under powers granted to the RBI under Section 47A(1)(c), read with Sections 46(4)(i) and 56 of the BR Act.

The statutory inspection of the bank was conducted by the National Bank for Agriculture and Rural Development (NABARD) based on its financial position as of March 31, 2023. Following the inspection, supervisory findings revealed non-compliance with statutory provisions, prompting the RBI to issue a show-cause notice.

After reviewing the bank’s response and oral submissions during a personal hearing, the RBI found that the bank had failed to transfer eligible unclaimed amounts to the Depositor Education and Awareness Fund (DEAF) within the prescribed timeline, warranting the penalty.

Penalty on The Panchkula Central Co-operative Bank Ltd., Haryana

On the same date, the RBI also imposed a ₹5 lakh penalty on The Panchkula Central Co-operative Bank Ltd., Haryana, for contravening the same provisions under Section 26A read with Section 56 of the BR Act.

NABARD conducted the statutory inspection of this bank as well, referencing its financial position as of March 31, 2023. The inspection findings revealed similar non-compliance issues, leading to a show-cause notice from the RBI.

After considering the bank’s reply and oral submissions during the personal hearing, the RBI determined that the bank had similarly failed to transfer eligible unclaimed amounts to the DEAF within the prescribed timeline, justifying the penalty.

Key Notes

• These penalties were imposed for deficiencies in regulatory compliance and are not judgments on the validity of any transactions or agreements entered into by the banks with their customers.
• The imposition of these penalties does not preclude the RBI from taking further action against the banks if warranted.

Both actions highlight the importance of strict adherence to regulatory requirements in the banking sector, particularly regarding unclaimed depositor funds.