The Reserve Bank of India (RBI) has taken strict action against The Satara Sahakari Bank Limited, based in Mumbai, Maharashtra. The bank has been penalized Rs 2 lakh for failing to comply with certain provisions of the Banking Regulation Act, 1949 (BR Act), and RBI directives on ‘Prudential Norms on Capital Adequacy – Primary (Urban) Co-operative Banks (UCBs)’.
Penalty Imposition
According to RBI, the penalty was imposed through an order dated April 29, 2024, under the powers vested in RBI as per section 47A(1)(c) read with sections 46(4)(i) and 56 of the BR Act. The statutory inspection conducted by RBI revealed discrepancies in the bank’s compliance with regulatory directives.
Compliance Issues
The statutory inspection, with reference to the bank’s financial position as of March 31, 2023, highlighted non-compliance with RBI directives. Subsequently, RBI issued a notice to the bank, prompting it to explain why a penalty should not be imposed for its failure to adhere to the prescribed directions.
Regulatory Action
Upon reviewing the bank’s response and supervisory findings of non-compliance, RBI found that the bank had allowed the refund of share capital to its members despite its Capital to Risk-Weighted Assets Ratio (CRAR) being below 9 percent. As a result, RBI imposed a monetary penalty on the bank.
Purpose of Penalty
The imposition of the monetary penalty underscores deficiencies in regulatory compliance and does not imply judgment on the validity of any transaction or agreement entered into by the bank with its customers. Furthermore, the penalty does not preclude RBI from taking any further action against the bank.
Conclusion
The penalty imposed by RBI on Satara Sahakari Bank Limited highlights the importance of regulatory compliance in the banking sector. As regulatory authorities continue to monitor and enforce compliance standards, banks are expected to prioritize adherence to regulatory directives to maintain financial stability and trust among stakeholders.
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