The Reserve Bank of India (RBI) has taken strict action against several financial institutions for deficiencies in regulatory compliance. Monetary penalties have been imposed on three co-operative banks and one non-banking financial company (NBFC) to ensure adherence to the regulatory framework and maintain the integrity of the financial system. The co-operative banks facing penalties are Annasaheb Magar Sahakari Bank Ltd, The Jawhar Urban Co-operative Bank Ltd, and Janata Urban Co-operative Bank Ltd, while the NBFC is Finquest Financial Solutions Private Ltd.
- Annasaheb Magar Sahakari Bank Ltd: This co-operative bank, located in Pune, Maharashtra, has been penalized with a ₹4.00 lakh fine for non-compliance with specific provisions of RBI directions. These include ‘Know Your Customer (KYC) direction, 2016,’ ‘maintenance of Deposit Accounts – Primary (Urban) Co-operative Banks,’ and ‘income recognition, asset classification, provisioning, and other related matters – UCBs.’ The bank failed to conduct periodic reviews of risk categorization of accounts, did not collect fixed penal charges for shortfalls in maintaining the minimum balance in savings accounts, and did not adhere to prudential norms regarding income recognition, asset classification, and provisioning.
- The Jawhar Urban Co-operative Bank Limited: This Palghar, Maharashtra-based co-operative bank has incurred a ₹1.00 lakh penalty for non-compliance with RBI’s directives on ‘Know Your Customer (KYC).’ The bank did not establish a system for the periodic updating of KYC information for its customers.
- Janata Urban Co-operative Bank Limited: Situated in Wai, Maharashtra, this co-operative bank has been fined ₹1.00 lakh by the RBI. The penalties have been imposed for non-compliance with RBI’s directions on ‘Frauds Monitoring and Reporting Mechanism.’ The bank reported cases of fraud with delays, which led to this punitive action.
Finquest Financial Solutions Private Limited: This Mumbai-based NBFC is facing a monetary penalty of ₹1.20 lakh for non-compliance with RBI’s directions on ‘Know Your Customer (KYC) Directions, 2016’ and ‘Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.’ The NBFC failed to conduct the risk categorization of its borrowers, did not rectify the shortfall in the loan-to-value (LTV) ratio for loans granted against collateral of shares within seven working days, and did not report data to all Credit Information Companies (CICs) as per the guidelines.
It’s important to note that these actions by the RBI are specifically based on deficiencies in regulatory compliance and are not intended to pronounce the validity of any transaction or agreement entered into by the banks or the NBFC with their customers.
In a separate development, the RBI has cancelled the Certificate of Registration of Chennai-based Ind Bank Housing Ltd, effective September 21, 2023. As a result, Ind Bank Housing Ltd will no longer transact the business of a Housing Finance Institution or a Non-Banking Financial Institution, as defined in the National Housing Bank Act, 1987, and the Reserve Bank of India Act, 1934, respectively.
These regulatory measures underscore the RBI’s commitment to ensuring that financial institutions operate in compliance with established norms and standards, promoting a stable and trustworthy financial system for all stakeholders.