Mumbai, September 28, 2023: The Reserve Bank of India (RBI) has taken stern action against Saraswat Co-operative Bank Limited, Mumbai, by imposing a monetary penalty of ₹23 lakh. This penalty comes as a consequence of the bank’s contravention of the provisions of Section 20(1)(b)(iii) read with Section 56 of the Banking Regulation Act, 1949 (BR Act), and the directives issued by the RBI concerning ‘Loans and advances to directors, their relatives, and firms/concerns in which they are interested.’ The RBI exercised its powers in accordance with the provisions of Section 47 A (1) (c) read with Sections 46 (4) (i) and 56 of the BR Act to impose this penalty.
The RBI’s move is rooted in regulatory compliance shortcomings and does not pass judgment on the validity of any transactions or agreements entered into by the bank with its customers.
The RBI’s scrutiny of Saraswat Co-operative Bank Limited was centered on its financial position as of March 31, 2021, and an examination of the Risk Assessment Report, along with all relevant correspondence. This examination revealed that the bank had violated the provisions of the BR Act and the RBI’s directions when it renewed a credit facility for a borrower company. Importantly, this renewal occurred while a director of the bank held the position of an independent director in the same borrower company.
In light of these findings, the RBI issued a notice to the bank, calling upon it to explain why a penalty should not be imposed for its failure to adhere to statutory provisions and RBI directives. Following this notice, the bank provided its response, along with additional submissions and oral presentations during a personal hearing.
After careful consideration of the bank’s arguments and evidence, the RBI has concluded that the charges of non-compliance with statutory provisions and RBI directives are substantiated. Consequently, the imposition of the ₹23 lakh monetary penalty is deemed warranted.
This incident underscores the RBI’s commitment to upholding regulatory standards and ensuring that financial institutions adhere to established guidelines. Such actions aim to maintain the integrity and stability of the banking sector while reinforcing the importance of adherence to statutory provisions and regulatory directives.
Saraswat Co-operative Bank Limited, Mumbai, has been directed to remit the monetary penalty to the RBI within a specified timeframe. This development serves as a reminder to all financial institutions to meticulously follow regulatory norms and directives to avoid punitive measures that can impact their operations and reputation.
