Three Indian banks penalized for lending violations

Two banks sanctioned loans to its directors, the RBI stated in separate notices.

The Reserve Bank of India (RBI) has imposed penalties on three banks for their failure to comply with banking regulations, in particular related to loans given out.

The Periyakulam Co-operative Urban Bank Ltd., Tamil Nadu was imposed a monetary penalty of ₹2,00,000 (Rupees Two Lakh only) for sanctioning loans beyond the eligible single borrower exposure limit, and sanctioning fresh loans and advances carrying risk weights more than 100%.

The bank also reportedly offered interest rates on deposits higher than those offered by the State Bank of India.

The bank refunded the share capital to members despite the CRAR being less than the regulatory minimum of 9%; and reportedly did not adhere to share linking norms in respect of jewel loans.

These actions do not comply with directions issued by RBI under ‘Supervisory Action Framework (SAF)’ and certain directions on ‘Issue and regulation of share capital and securities − Primary (Urban) Co-operative Banks’ and ‘Prudential Norms on Capital Adequacy – UCBs’.

Meanwhile, The Kanara District Central Co-operative Bank Ltd., Karnataka also got a monetary penalty of ₹1,00,000/- (Rupees One Lakh only) for sanctioning loans to its directors and to companies in which its directors have interest in.

Kanara District Central Co-operative Bank’s actions reportedly contravened provisions of Section 20 read with Section 56 of the Banking Regulation Act, 1949 (BR Act), the BRI said.

Finally, the Raichur District Central Co-operative Bank, Karnataka was penalized ₹50,000/- (Rupees Fifty Thousand only) for sanctioning loans to its directors.

The bank's actions contravened provisions of Section 20 read with Section 56 of the Banking Regulation Act, 1949 (BR Act), the RBI said.