Reserve Bank of India – Press Releases

The Reserve Bank of India (RBI) has, by an Order dated September 16, 2022, imposed a financial penalty of ₹1.00 lakh (Rupees one lakh solely) on The Varachha Co-operative Bank Ltd., Surat (Gujarat) (the financial institution) for contravention of instructions issued by RBI on ‘Loans and advances to directors etc- directors as surety/guarantors- Clarification-UCBs’. This penalty has been imposed in train of powers vested within the RBI beneath the provisions of Section 47 A (1) (c) learn with Sections 46 (4) (i) and 56 of the Banking Regulation Act, 1949, taking into consideration the failure of the financial institution to stick to the aforesaid instructions issued by RBI.

This motion relies on deficiencies in regulatory compliance and isn’t meant to pronounce upon the validity of any transaction or settlement entered into by the financial institution with its prospects.

Background

The statutory inspection of the financial institution performed by RBI as regards to the financial institution’s monetary place as on March 31, 2021, and examination of the Risk Assessment Report and all associated correspondence pertaining to the identical revealed, inter alia, that the financial institution had sanctioned two credit score amenities to people whereby a relative of one of its administrators stood because the surety / guarantor, leading to contravention of aforesaid instructions issued by RBI. In furtherance to the identical, a discover was issued to the financial institution advising it to indicate trigger as to why penalty shouldn’t be imposed for contravention of the aforesaid instructions issued by RBI.

After contemplating the financial institution’s reply to the discover, the RBI got here to the conclusion that the aforesaid cost was substantiated and warranted imposition of financial penalty.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2022-2023/942