The Reserve Bank of India (RBI) has taken action against Bombay Mercantile Co-operative Bank Ltd, imposing a monetary penalty of Rs 63.30 lakh. The penalty was enforced through an order issued on February 6, as announced by the central bank on Thursday.
According to an official statement from the RBI, the penalty is a result of identified deficiencies in regulatory compliance and does not signify a judgment on the validity of any transactions or agreements between the bank and its customers.
The decision to impose the penalty came after a review of the bank’s compliance with the Supervisory Action Framework (SAF) reports dated March 31, 2021, and March 31, 2022. The review uncovered instances where the bank offered interest rates on deposits exceeding those offered by the State Bank of India (SBI), contravening the directions outlined in the SAF.
The statutory inspections conducted by the RBI on the bank’s financial position as of March 31, 2021, and March 31, 2022, revealed several irregularities. These included the sanctioning and disbursing of loans to nominal members beyond the regulatory ceiling of Rs 1.00 lakh, as well as gold loans with bullet repayment options exceeding the regulatory limit of Rs 2.00 lakh. Additionally, the bank was found to have levied charges for activating dormant accounts, claiming it as reimbursement for such activation expenses.
Following these findings, the RBI issued a notice to the bank, prompting it to show cause as to why a penalty should not be imposed for non-compliance with RBI directives. After considering the bank’s response, additional submissions, and oral arguments presented during a personal hearing, the RBI concluded that the charges of non-compliance were substantiated, warranting the imposition of a monetary penalty.
The penalty, amounting to Rs 63.30 lakh, has been enforced under the powers vested in the RBI by section 47A(1)(c) in conjunction with sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
This action by the RBI underscores the importance of banks adhering to regulatory directives to ensure the stability and integrity of the banking system, thereby safeguarding the interests of depositors and stakeholders.