RBI imposes monetary penalty on Nakodar Hindu Urban Cooperative Bank for violation of norms

New Delhi [India], February 8 : The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs 6 lakh on the Nakodar Hindu Urban Cooperative Bank Ltd, the central bank said on Thursday.
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, the RBI said.
The compliance on the review report of Supervisory Action Framework (SAF) dated July 26, 2021, submitted by the bank revealed that it had offered interest rates on deposits for various durations higher than that offered by SBI in non-compliance with the SAF directions, the RBI said.
The central bank further said that the statutory inspection of the bank conducted by RBI with reference to its financial position as of March 31, 2022, and examination of the inspection report, risk assessment report and all correspondence related thereto revealed that the bank had failed to adhere to IRAC norms, and paid dividend, sanctioned or renewed loans exceeding 50 per cent of applicable regulatory limit for single borrower exposure, incurred capital expenditure exceeding the prescribed limit and incurred operating expenditure by granting gifts, in violation of specific directions issued under SAF.
Consequently, a notice was issued to the bank advising it to show cause as to why a penalty should not be imposed on it for failure to comply with the directions.
"After considering the bank's reply to the notice and oral submissions made by it during the personal hearing, RBI came to the conclusion that the aforesaid charge of non-compliance with the RBI directions was substantiated and warranted imposition of monetary penalty on the bank," the RBI said.
This penalty has been imposed in the exercise of powers conferred on RBI under the provisions of section 47A(1)(c) read with sections 46(4)(i) and 56 of the Banking Regulation Act, 1949, it added.