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The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹4.00 lakh (Rupees Four lakh only) on Shri Kanyaka Nagari Sahakari Bank Ltd., Chandrapur, Maharashtra, for non-compliance with directions issued by RBI to Urban Co-operative Banks on Know Your Customer (KYC). The penalty was imposed under the powers vested in RBI under Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949, taking into account the failure of the bank to adhere to the prescribed directions.
The inspection report of the bank, based on its financial position as on March 31, 2021, revealed that the bank lacked a system for periodic review of risk categorisation of accounts, did not have a mechanism for periodic KYC updation of its customers, and lacked robust software to identify and monitor suspicious transactions. These deficiencies were in contravention of RBI’s KYC directions. A notice was issued to the bank, advising it to show cause as to why a penalty should not be imposed for the non-compliance.
After considering the bank’s replies and oral submissions during the personal hearing, RBI concluded that the charges of non-compliance were substantiated and warranted the imposition of the monetary penalty. This 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.
[RBI]