India’s central bank and regulatory body, The Reserve Bank of India (RBI) obtruded monetary penalties on eight cooperative banks for the violation of loan and know your customer norms on January 24.
The banking regulator occasionally retaliates culpable cooperative banks for several violations. The RBI’s EFD was organised in April 2017 to diverge enforcement activity from the supervisory process. EFD recognises risk assessment, actionable violations from inspection reports and scrutiny reports. If violations persist, stronger measures are taken to safeguard the interest of depositors. The RBI’s enforcement operation is conducted by the Enforcement Department.
These banks are Rajkot Peoples Cooperative Bank, Vasai Janata Sahakari Bank, Mogaveera Cooperative Bank, The Varachha Cooperative Bank, The Associate Cooperative Bank, Bhadradri Cooperative Urban Bank, The Jammu Central Co-operative Bank and Jodhpur Nagrik Sahakari Bank.
In most cases, the violations pertain to giving loans and advances to directors or related parties, overlooking know-your-customer norms and lending exposure guidelines. RBI imposes a penalty in the form of a press release and by the regulated entity as per the disclosure norms. The regulated entity is required to pay the fine within the specified period. Market intelligence reports, references from the top management and complaints are also used. An Adjudication Committee then inspects the violations and demarcates the quantum of penalty.
On January 20, the RBI had conducted an overnight variable rate repo (VRR) auction of ₹ 50,000 crores. The monetary policy is a policy formulated by the central bank, i.e., RBI (Reserve Bank of India) and relates to the monetary matters of the country. The policy involves measures taken to regulate the supply of money, availability, and cost of credit in the economy.
