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1. District Central Co-operative Bank Ltd., Bilaspur (Chhattisgarh)
Key Details
- Penalty Amount: ₹1,00,000
- Reason: Failure to transfer eligible unclaimed amounts to the Depositor Education and Awareness Fund (DEAF) within prescribed time.
- Regulatory Reference: Section 26A read with Section 56 of the Banking Regulation Act, 1949.
Root Cause Analysis (RCA)
- Weak internal tracking of unclaimed deposits.
- Lack of timely reconciliation of dormant accounts.
- Inadequate compliance monitoring of DEAF obligations.
Preventive Controls
- Automate DEAF transfers with alerts for due dates.
- Monthly reconciliation of dormant accounts.
- Dedicated compliance officer to monitor statutory submissions.
Lessons Learnt
- Even basic statutory lapses attract penalties.
- Regular monitoring and automation are critical to avoid delays.
2. The Kasaragod Co-operative Town Bank Ltd., Kerala
Key Details
- Penalty Amount: ₹1,00,000
- Reason:
- Sanctioned loans beyond permissible group exposure limit.
- Non-implementation of RBI-mandated Cyber Security Framework.
- Regulatory Reference: RBI Directions on Exposure Norms and Cyber Security for UCBs.
Root Cause Analysis (RCA)
- Weak credit appraisal & monitoring processes.
- Poor Board oversight on exposure concentration.
- Lack of investment in cyber resilience and IT governance.
Preventive Controls
- Enforce system-based checks on single/group exposure before loan sanction.
- Periodic stress testing of loan portfolio for exposure risks.
- Implement cyber security framework with endpoint monitoring, periodic audits, and penetration testing.
Lessons Learnt
- Prudential norms safeguard against concentration risk.
- Cyber security non-compliance is a high-priority regulatory concern.
3. Altum Credo Home Finance Pvt. Ltd., Pune (Maharashtra)
Key Details
- Penalty Amount: ₹10,000
- Reason: Failure to periodically review KYC risk categorisation of accounts (at least once every 6 months).
- Regulatory Reference: RBI Directions on KYC under Section 52A of the NHB Act, 1987.
Root Cause Analysis (RCA)
- Absence of system-driven alerts for risk categorisation review.
- Manual reliance on KYC verification processes.
Preventive Controls
- Automate periodic (6-monthly) risk categorisation reviews.
- Establish compliance dashboard for KYC monitoring.
- Train staff on enhanced due diligence processes.
Lessons Learnt
- Small NBFCs/HFCs are equally accountable for KYC compliance.
- Even minor lapses reflect weak governance culture.
4. The Nalgonda District Co-operative Central Bank Ltd., Telangana
Key Details
- Penalty Amount: ₹2,50,000
- Reason: Sanctioning loans to directors – violation of Section 20 of the Banking Regulation Act.
- Regulatory Reference: Section 20 read with Section 56 of BR Act, 1949.
Root Cause Analysis (RCA)
- Breach of conflict-of-interest policies.
- Governance failure in credit approval to related parties.
- Weak Board oversight and ethical controls.
Preventive Controls
- Explicit prohibition of director-related lending in Board policies.
- Annual director declarations on related-party interests.
- Audit committee review of all high-value credit approvals.
Lessons Learnt
- Governance failures invite high penalties and reputational risk.
- Independence of decision-making is critical in credit approvals.
5. The Utkal Cooperative Bank Ltd., Bhubaneswar (Odisha)
Key Details
- Penalty Amount: ₹2,53,000
- Reasons:
- Capital expenditure incurred without RBI approval (violation of SAF).
- Non-submission of credit information to CICs.
- Failure to upload KYC records to CKYCR.
- No periodic review of KYC risk categorisation.
- Regulatory Reference: Section 47A(1)(c), Section 25 of CIC Act, 2005, KYC Directions.
Root Cause Analysis (RCA)
- Weak adherence to RBI’s Supervisory Action Framework (SAF).
- Poor IT integration for CIC reporting and CKYCR uploads.
- Lack of structured compliance monitoring for KYC processes.
Preventive Controls
- Implement workflow for prior RBI approvals before capital expenditure.
- Automate CIC reporting and CKYCR uploads.
- Compliance MIS dashboard for KYC tracking.
- Quarterly internal audits focused on SAF compliance.
Lessons Learnt
- Multiple regulatory lapses attract cumulative penalties.
- IT-enabled compliance monitoring is essential for accuracy and timeliness.
