According to the central bank, the penalty was imposed on the urban cooperative banks for non-compliance, violation of directions issued under exposure norms and statutory or other limits.
RBI has imposed this fine under the provisions of RBI banking regulation act of 1949. (AACS).
According to RBI, this action is based on regulatory compliance deficiencies and is not intended to rule on the validity of any transaction or agreement entered into by the bank with its customers. According to the RBI statement, the inspection report of the bank based on its financial position as on March 31, 2020 and March 31, 2021 revealed that the bank’s investment in commercial paper is in excess of the prudential individual exposure limit of 15% of capital funds. On the basis of this a show cause notice was issued to the bank as to why penalty should not be imposed for not complying with the directions.
In a statement, the central bank said that after considering the bank’s response and oral submissions made during the personal hearing, it was concluded that the above allegation of non-compliance with RBI directions was substantiated and warranted imposition of monetary penalty. .