RBI Fined Two Banks in Maharashtra and Gujarat for Not Following Rules

The Reserve Bank of India (RBI) has recently imposed monetary penalties on two cooperative banks in Maharashtra and Gujarat for not following certain banking rules. These penalties were imposed after RBI inspections and hearings, based on violations of RBI guidelines.

1. Saibaba Nagari Sahakari Bank, Sailu, Maharashtra – ₹50,000 Penalty

The RBI has imposed a fine of ₹50,000 on Saibaba Nagari Sahakari Bank Maryadit, located in Sailu, Maharashtra, for violating rules related to KYC (Know Your Customer) norms.

What went wrong:

• The bank did not upload KYC details of some customers to the Central KYC Records Registry (CKYCR) within the required time.
• The bank also failed to update KYC details regularly for some customers, as required by RBI rules.

How RBI acted:

• RBI conducted an inspection based on the bank’s financials as of March 31, 2024.
• After identifying the issues, RBI issued a notice to the bank asking why a penalty should not be imposed.
• After reviewing the bank’s written and oral responses, RBI decided that the bank did not comply with the rules, and hence the penalty was justified.

Important Note:

This penalty is purely for regulatory non-compliance. It does not affect any agreement or transaction the bank has made with its customers. Also, the RBI may take further action if needed.

2. Shree Kadi Nagarik Sahakari Bank Ltd., Mehsana, Gujarat – ₹14.30 Lakh Penalty

The RBI has also imposed a much larger fine of ₹14.30 lakh on Shree Kadi Nagarik Sahakari Bank Ltd., located in Mehsana district, Gujarat.

Why the penalty was imposed:

• The bank donated money to a trust where a relative of one of the bank’s directors had an interest, which goes against RBI’s rules on donations.
• The bank also failed to check how some loan funds were used, meaning it didn’t monitor the end-use of loans properly, which is a serious violation of lending guidelines.

RBI’s process:

• Like the other case, RBI inspected the bank based on its financial status as of March 31, 2024.
• The bank was asked to explain its actions, and after reviewing written replies and hearing the bank’s explanation, RBI found the violations to be valid and imposed the penalty.

Important Note:

This action is also based on compliance issues and does not affect any customer dealings or legal agreements. Further regulatory action may be taken if necessary

Bank Name	Location	Penalty Amount	Reason
Saibaba Nagari Sahakari Bank Maryadit	Sailu, Maharashtra	₹50,000	Failed to upload and update KYC details
Shree Kadi Nagarik Sahakari Bank Ltd.	Mehsana, Gujarat	₹14.30 lakh	Donated to related-party trust and failed to track loan usage

Both penalties were issued under the powers given to RBI by the Banking Regulation Act, 1949, and highlight the RBI’s strict approach towards ensuring transparency, accountability, and good governance in cooperative banks.