1. Key Regulatory Details
| Name of the Entity | The Nandura Urban Co-operative Bank Ltd., Nandura, Maharashtra |
|---|---|
| Penalty Amount | ₹1,00,000 (Rupees One Lakh) |
| Order Date | January 13, 2026 |
| Press Release Date | January 19, 2026 |
| Reference Inspection Date | March 31, 2025 |
| Regulatory Violation | Non-compliance with ‘Exposure Norms and Statutory / Other Restrictions – UCBs’ |
2. Root Cause Analysis (RCA)
The penalty stems from a specific compliance failure identified during the statutory inspection. The core issue revolves around the management of exposure limits for specific member categories.
- Primary Failure: The bank sanctioned loans to “Nominal Members” that exceeded the prescribed regulatory ceilings.
- Process Gap: Lack of real-time validation checks in the loan origination system to cap amounts for nominal members specifically.
- Policy Oversight: Potential ambiguity in the bank’s internal credit policy regarding the distinction between “Regular” and “Nominal” member entitlements.
- Monitoring Deficiency: Failure of the internal audit mechanism to detect exposure breaches before the regulatory inspection.
3. Preventive Controls & Mitigation
To prevent recurrence of similar violations, the following control mechanisms are recommended:
- System Hard Stops (CBS): Implement hard-coded limits in the Core Banking Solution (CBS) that automatically reject loan applications for nominal members if the amount exceeds the RBI prescribed cap.
- Master Data Management: Ensure customer profiles clearly distinguish between “Regular” and “Nominal” membership types to trigger appropriate lending rules.
- Pre-Disbursement Audit: Introduce a mandatory “Maker-Checker” step for all nominal member loans, requiring specific sign-off from the compliance officer.
- Periodic Review: Quarterly review of the ‘Exposure Norms’ Master Circular to update internal limits aligned with any revised RBI thresholds (e.g., changes in ceiling amounts).
4. Lessons Learnt
- Strict Adherence to Caps: Exposure norms are absolute. Even minor deviations or “business need” justifications are not accepted by the regulator for statutory limits.
- Nominal Member Restrictions: Nominal members do not enjoy the same borrowing rights as regular members. This distinction must be deeply embedded in the credit culture.
- Timely Remediation: Deficiencies pointed out in inspection reports must be rectified immediately; prolonged non-compliance leads to monetary penalties under Section 47A(1)(c).