The Reserve Bank of India on Friday imposed a monetary penalty of Rs 50 lakh on Bombay Mercantile Co-operative Bank for non-compliance with certain directions.
Bombay Mercantile Co-operative Bank has been charged for non-compliance with directions issued by RBI contained in in the Reserve Bank of India (Co-operative Banks - Interest Rate on Deposits) Directions, 2016 and specific directions dated March 05, 2018, and April 11, 2018, issued under the Supervisory Action Framework (SAF), noted the central bank in an official statement.
"This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949, taking into account failure of the bank to adhere to the aforesaid directions issued by RBI," the official statement read.
The RBI had conducted a statutory inspection of Bombay Mercantile Co-operative Bank with reference to its financial position as of March 31, 2019. The inspection report and the examination of all related correspondence, among other things, revealed that Bombay Mercantile Co-operative Bank had offered interest rates on NRE deposits higher than those offered by it on comparable domestic rupee term deposits and had sanctioned unsecured advances.
This action of Bombay Mercantile Co-operative Bank was in non-compliance with the the RBI directions, which is why the RBI issued a notice to the bank asking why a penalty should not be imposed on it.
After considering Bombay Mercantile Co-operative Bank's reply and oral submissions, the RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated.
The RBI has explained its action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by Bombay Mercantile Co-operative Bank with its customers.
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