RBI cancels UP Urban Co-operative Bank’s licence; fines 4 regional banks

The Reserve Bank of India (RBI) has cancelled the licence of “Urban Co-operative Bank Limited, Sitapur, Uttar Pradesh”. The RBI has directed the bank to stop conducting banking business, with effect from the close of business on December 07, 2023. The Commissioner and Registrar of Cooperative, Uttar Pradesh, has also been requested to issue an order for winding up the bank and appoint a liquidator.

"On liquidation, every depositor will be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of ₹5,00,000 from Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of DICGC Act, 1961," the apex bank order says. The data submitted by the bank shows 98.32% of the depositors are entitled to receive the full amount of their deposits from DICGC.

The Reserve Bank has cancelled the licence as the co-operative bank does not have adequate capital and earning prospects. The RBI says the bank's continuance is "prejudicial to the interests of its depositors", and that with its present financial position, it will be unable to pay its present depositors in full. "Public interest would be adversely affected if the bank is allowed to carry on its banking business any further."

After this, Urban Co-operative Bank Limited, Sitapur, Uttar Pradesh, will not be able to carry out the business of ‘banking’, which includes, among other things, acceptance of deposits and repayment of deposits, with immediate effect, says the central bank.

Penalty on Pune Bank

The RBI also imposed ₹1 lakh fine on Rajarshi Shahu Sahakari Bank Ltd., Pune, Maharashtra (the bank) for non-compliance with the directions issued by RBI on ‘Maintenance of Deposit Accounts - Primary (Urban) Co-operative Banks’. Its statutory inspection with reference to its financial position as of March 31, 2022, and examination of the Inspection Report, and Risk Assessment Report found the bank had imposed fixed penal charges for shortfall in maintenance of minimum balance in savings bank accounts, instead of imposing penal charges proportionate to the extent of shortfall, and had also failed to notify its customers about the shortfall in minimum balance before levying charges.

Penalty on Telangana Bank

The Reserve Bank of India (RBI) has also imposed a monetary penalty of ₹10,000 on The District Co-operative Central Bank Ltd., Mahabubnagar, Telangana for non-compliance with the directions issued by the National Bank for Agriculture and Rural Development (NABARD) on ‘Review of Frauds – Guidelines on Monitoring and Reporting System’.

The RBI says the NABARD probe found out that the bank had not reported cases of fraud to NABARD in the stipulated timeline.

Penalty on Maharashtra Banks

The central bank has also imposed a monetary penalty of ₹1 lakh on Patan Co-operative Bank Limited, Mumbai, Maharashtra (the bank) for violations of 'Know Your Customer (KYC) Direction, 2016’.

The RBI probe found out that the bank had failed to carry out a periodic review of risk categorisation of accounts, following which a penalty was imposed on the bank.

The RBI has also imposed a monetary penalty of ₹1 lakh on The Prathamik Shikshak Sahakari Bank Limited, Satara, Maharashtra (the bank) for non-compliance with the directions issued by RBI on ‘Management of Advances-UCBs’. The bank had sanctioned "gold loans beyond prescribed regulatory limit" under the bullet repayment scheme.