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RBI closes 3 Cooperative Banks and imposes penalty on 20 Banks


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The Reserve Bank of India (RBI) has been taking regular action against weak cooperative banks, alongside its recent measures against Paytm Payments Bank. These actions primarily focus on weak capital ratios and poor corporate governance standards within the banks. The RBI has imposed monetary penalties on 20 cooperative banks in 2024 and cancelled the licences of three banks, namely Shree Mahalaxmi Mercantile Co-operative Bank, Hiriyur Urban Co-operative Bank, and Jai Prakash Narayan Nagari Sahakari Bank.

Reasons for Penalties:

The monetary penalties imposed by the RBI range from Rs 25,000 to Rs 3 lakh and are primarily a result of various violations and non-compliance. The reasons cited by the RBI include failure to pay interest on balance amounts in deceased individual depositors’ savings accounts, violation of Know Your Customer (KYC) norms, entering into one-time settlements without prior permission from the RBI, and other violations of banking norms.

Challenges Faced by Cooperative Banks:

Cooperative banks operate at the lower end of the banking pyramid, serving semi-urban and rural areas. These banks have played a crucial role in extending banking services to villages and semi-rural areas. However, the industry faces challenges such as dual regulation, weak finances, and interference by local politicians in administrative affairs.

Increased Scrutiny after the PMC Bank Crisis:

The RBI intensified its scrutiny of cooperative banks following the collapse of Punjab and Maharashtra Cooperative (PMC) Bank in 2019. The RBI issued directions to PMC Bank and later superseded its board. Subsequently, the RBI cancelled the licences of 40 cooperative banks and imposed monetary penalties 514 times. In the years that followed, penalties were imposed, licences were cancelled, and the RBI continued to monitor the sector closely.

RBI Data and Measures:

As of January 18, 2023, India had 351 district cooperative banks with a cumulative loan book of Rs 3.3 lakh crore and deposits of Rs 4.12 lakh crore. The gross non-performing assets (GNPA) of these banks stood at 11%, and accumulated losses amounted to Rs 7,753 crore. Additionally, around 39 banks had capital adequacy below the mandated 9%. In the June 2023 Monetary Policy Committee (MPC) meeting, the RBI announced guidelines on compromise settlements and technical write-offs for cooperative banks. The RBI also extended deadlines for meeting priority sector lending (PSL) targets.

Expert Views:

Industry experts suggest that the RBI’s recent measures reflect a closer examination of cooperative banks, which have significant influence in rural areas. Experts anticipate additional measures from the RBI in the future. The regulatory actions taken by the RBI aim to address governance and regulatory issues within cooperative banks, highlighting the need for improvements in these areas.

Conclusion:

The RBI’s regulatory actions on cooperative banks, including monetary penalties and licence cancellations, underline the importance of strong capital ratios and corporate governance standards. These actions serve to address violations and non-compliance within the sector. Cooperative banks play a crucial role in rural areas, and their stability and compliance with regulations are essential for the overall health of the banking system.

5 Comments

  1. In my opinion Concurrent Auditor in all Branches of cooperatives Banks must be posted and reporting of daily audit by CCA must be informed to controller of the concerned Bank and concerned Deptt. of RBI

  2. date 19 Feb 24,
    Typical non conformance of pvt Bank, THREE FAMILY PAN -SIMILAR NON CONFORMANCE)
    May be a SUO MOTO for RBI, how SR CITIZENS/SUPER SR CITIZENS SUFFERING, UNDUE LOSS OF HIGH INT RATE OF FD IN WAY -FORGET FORM G/H- THEN HIGH % TDS-WE RAISE ISSUE-REALISED FORM G/H ALREADY GIVEN, THEN TRANSFERRING PART REFUND IN LOW INT SB AC-REVERSE TDS CREDIT-NOT MENTIONED IN FORM 16A,-26 AS, ALL CONFUSING .
    ( ONE FD-93 % TDS, FROM PRINCIPAL AMOUNT -NOT FROM INT QUANTUM!!!!) 26 AS ZERO TDS!!!

    We appreciate,RBI,initiatives,on closure /penalised number of banks, mainly so many co op banks, for well being of customers, thanks to RBI,

    We request, how RBI will look at non conformances of pvt banks, where SR CITIZENS suffer most,
    for example, FY 2020-21,banking operations /TDS/REFUND issues NOT resolved,
    Form G/H was given In time, still bank exercise TDS for whole FY from many FD,s,( one FD,93% TDS from principal amount!!!),then realised G/H was given in time, so only part Refund, REVERSE, not accounted in form 16A, 26 AS,TDS zero!!!), refer to RBI, pvt Bank submitted EXTERNAL CA AUDIT CERT, just for Rs 8000+,refund, dated May 23 to RBI-to me,, and RBI close our issue WITHOUT referring our counter feed back, CA also commits form G/H was given after words, ( WRONG STATEMENT,), bank commits TDS was only 10 %, but the fact, FY 2020-21,it was only 7.5% in our case, ( ADHAR LINKED WITH PAN-REGULARLY FILED ITR )
    all issues discussed at length with home branch, email,trail mail to HO,, no SATISFACTORY REPLY, so finally all non conformances on tweeter handle attn RBI, pvt bank,as Query Q1 to Q4, ( Issue on tweeter-personal details on DM reply) on date, 11, 22, 25, 29, December, 2023, still as on date 18 Feb 24, we have not recd satisfactory reply and shunting us to BH-HO-BH.
    for same issue,four PNO including external CA AUDIT REPORT,gives diff reply, and each one challanging others reply,
    We requested RBI/ bank for firm reply,as like capcha/OTP, (not SN/SR-give three days, more time reqd- like wise)
    Query Q5 (other than Q1-Q4) follows on tweeter in a week time
    We request, RBI to look in to our issue in totality, and not just believing what EXTERNAL CA AUDIT REPORT mentions, NEEDLESS TO SAY, ALL NON CONFORMANCE. DISCUSSED AT LENGTH WITH HOME BRANCH ,WITH SUPPORTING DOCUMENTS WITH OUR ORIGINAL FDs AND AS A CUSTOMER, OUR QUERIES ARE REASONABLE BUT BH HAS THEIR OWN CONSTRAINTS AND HO, DIFF PNO GIVES DIFF REPLY- WHAT A WORLD CLASS INNOVATIVE DIGITAL SYSTEM,!!!???,OF PVT BANK
    THANKS,

  3. A person who have not worked in Cooperative Banks will not understand the modus operandi, environment, culture etc.
    I was the CEO if two Cooperative Bank s, I know where where the shoe pinches. The regulatory authorities should ask like people ,to voice their concern then the can understand though they may know many of the problems already
    Ashish Bardhan
    9848916901

  4. Welcome Modi Government. Soon to see all getting privatised. Private Government is the future. RBI it’s a direct hit on you getting privatised in the background.

  5. By closure of PMC Bank, Middle Class lost money. Even RBI not yet take action to get shareholders money. Please assure to get hard earned money of shareholders.

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