RBI imposed a fine of Rs 3 lakh on the Sultanpur District Cooperative Bank in Uttar Pradesh

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RBI's Penalty: Sultanpur Bank

Highlights

RBI imposed a fine of Rs 3 lakh on the Sultanpur District Cooperative Bank in Uttar Pradesh for violating regulatory guidelines.
Based on the inspection of the bank's financial position as of March 31, 2025, by NABARD, the bank was found to have failed in credit information submission, risk review, and transfer of unclaimed amounts.
RBI clarified that this action is solely for regulatory compliance deficiencies and will lead to stricter enforcement in the cooperative banking sector.

This article was translated from the original. Read the original version by our correspondent here.

Regulatory Action Following Inspection

According to a press release from the RBI, this penalty was imposed for violations of Section 26A read with Section 56 of the Banking Regulation Act, 1949, as well as certain directions issued to cooperative banks regarding membership of credit information companies and KYC. The central bank took this action by exercising powers under Section 47A(1)(c), Section 46(4)(i), Section 56 of the Banking Regulation Act, and Section 25 read with Section 23 of the Credit Information Companies (Regulation) Act, 2005.

The statutory inspection of the bank was conducted by the National Bank for Agriculture and Rural Development (NABARD) with reference to the bank’s financial position as of March 31, 2025. Based on supervisory findings and related correspondence, a show cause notice was issued to the bank, asking why a penalty should not be imposed for failure to comply with the relevant provisions and directions. After considering the bank’s reply, additional submissions, and oral arguments made during the personal hearing, the RBI found the charges to be substantiated.

Compliance Deficiencies and Regional Impact

According to the RBI, the bank failed to submit credit information of its borrowers to all four credit information companies. Additionally, no system was established for periodic review of account risk categories, robust software was not implemented for effective identification and reporting of suspicious transactions, and eligible unclaimed amounts in certain accounts were not transferred to the Depositor Education and Awareness Fund within the prescribed timeline.

The central bank clarified that this action is based on deficiencies in statutory and regulatory compliance and does not express any opinion on the validity of any transaction or agreement entered into by the bank with its customers. The RBI also stated that this monetary penalty does not affect any other action that may be taken against the bank in the future, indicating stricter enforcement of compliance standards in the cooperative banking sector.

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