Karnataka Co-operative Bank faced Rs 1 Lakh penalty for non-compliance

The Reserve Bank of India has imposed a monetary penalty of Rs 1 lakh (Rupees One Lakh only) on The Karnataka Co-operative Bank Limited, Muddebihal, Karnataka for non-compliance with certain directions issued by RBI on ‘Exposure Norms and Statutory / Other Restrictions, UCBs and Know Your Customer (KYC).

The penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.

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The Central Bank has stated that a statutory inspection of the bank was conducted by RBI with reference to its financial position as on March 31, 2024.

Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why a penalty should not be imposed on it for its failure to comply with the said directions.

After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI found, inter alia, that the following charges against the bank were sustained, warranting imposition of monetary penalty:

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According to the press release, the bank had breached the prudential inter-bank (gross) and counterparty exposure limits; and failed to upload the KYC records of customers onto Central KYC Records Registry within the prescribed timeline.

Further, the bank has stated that action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers. The imposition of this monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank.

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