RBI imposes fine on BDCC bank over non compliance of loan disbursal norms

The Reserve Bank of India (RBI) has imposed a fine of ₹2 lakh on the Belagavi District Central Cooperative (BDCC) Bank for non compliance of loan disbursal norms. The cooperative bank had violated rules regarding non disbursal of loans to directors, crossing the regulatory limits of gold loans under the bullet repayment scheme and sanctioned loan to non-residential commercial real estate projects, said a letter by the RBI.

BDCC has violated provisions of Section 20 read with Section 56 of the Banking Regulation Act, 1949 (BR Act) and non-compliance with certain directions issued by RBI on ‘Gold Loan – Bullet Repayment’ and ‘Exposure to Commercial Real Estate’. This 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 BR Act, said a letter from the RBI. The violations are between six to seven years old.

This follows two rounds of inquiries by the NABARD officials and the RBI. A show cause notice was issued to the bank management and oral and written replies were sought.

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

The bank has admitted the violations.

Balachandra Jarkiholi, Former director of the bank said that the allegations pertain to 2019, the period when Ramsh Katti was the chairman. He said that Mr Katti who headed the bank for nearly two decades, had taken unilateral decisions and violated the RBI provisions. “I was in the board of directors then, but Mr Katti did not consult me or other directors. He is responsible for the errors, Balachandra Jarkiholi said. He alleged that Mr Katti, whose panel lost the recent elections, was engaged in spreading rumours about the functioning of the new chairman Anna Saheb Jolle and other directors now. During his tenure, Mr Katti released loans to his relatives also, but he is blaming the new management. It is unfair,’’ he said.

Mr Katti, in turn has claimed that the then board members forced him to violate the rules. “It is true that we gave loans to some persons who were directors in violation of rules. But that was because the members forced me to do it. I advised them against it, but they brought pressure on me. In one case, I wrote a letter to the Joint registrar of cooperative societies against such an attempt. But the members prevailed over me and lobbied with the state government to override my letter. Now they can not turn around and blame me for it. However, the three cases pointed out by the RBI are not very serious. All the loans are of small amounts, and have been given against appropriate securities,’’ Mr Katti said.