On Tuesday, the Reserve Bank of India (RBI) imposed a monetary penalty of ₹10 lakhs on the Gadhinglaj Urban Co-operative Bank following its violation of directions issued by the central bank.
The RBI stated in a release that the violation was related to loans and advances to directors, relatives and exposure norms. The action was based on deficiencies in regulatory compliance with no intention to pronounce upon the validity of any transaction or agreement entered into by Gadhinglaj with its customers.
In addition, the inspection held by RBI disclosed that the bank had an advanced loan to a director of the bank snd provided new loans to the real estate sector in violation of the operational instructions issued by the central bank under the Act’s provisions.
RBI added that the inspection also revealed that the bank had not implemented the system of periodic review of risk categorization of accounts. A notice was issued to Gadhinglaj alongside advice to show cause as to the reason penalty should not be imposed for non-compliance with the aforesaid directions.
After considering Gadhinglaj reply to the central bank’s notice as well as oral submissions made during the personal hearing, RBI concluded that the aforesaid charge of non-compliance with its directions was “substantiated and warranted imposition of monetary penalty.”
