The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹5 crore on Gujarat-based Mehsana Urban Co-operative Bank for contravention of the directions issued by it on ‘Loans and Advances to Directors, Relatives and Firms/Concerns in which they are Interested’, and non-compliance with the Master Directions on ‘Know Your Customer (KYC)’.

“The penalty has been imposed in exercise of powers vested in RBI under the provisions of …the Banking Regulation Act, 1949, for failure of the bank to adhere to the aforesaid directions issued by RBI,” the central bank said in a statement.

This action is based on deficiencies in regulatory compliance, and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers, it added.

According to the RBI, its statutory inspection of the bank with reference to its financial position as on March 31, 2018, revealed non-compliance with its directions contained in various circulars, including on ‘Loans and Advances to Directors, Relatives and Firms/Concerns in which they are Interested’, ‘Exposure Norms and Statutory/Other Restrictions – UCBs’, ‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (UCBs)’, and Master Directions on ‘Know Your Customer (KYC)’.

A notice was issued to the bank to show cause as to why monetary penalty should not be imposed for non-compliance with the aforesaid directions. After considering the bank’s reply and oral submissions made during the personal hearing, the RBI said it came to the conclusion that the charges regarding non-compliance with its directions on ‘Loans and Advances to Directors, Relatives and Firms/Concerns in which they are Interested’ and ‘Know Your Customer (KYC)’ were established which warranted imposition of monetary penalty.

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