Monday, June 22, 2015

RBI imposes INR 20 lacs penalty on The Hubli Urban Co-operative Bank Ltd., Hubli, Karnataka

A hefty fine of INR 20 lacs (Rupees Twenty lakh only) has been imposed   ‘The Hubli Urban Co-operative Bank Ltd., Hubli, Karnataka’, by Reserve Bank of India.
This fine is for violation of Reserve Bank of India’s instructions for irregularities in cheque discounting, overdrawal in OD loan accounts etc.
Cheque discounting : Cheque discounting is a component of Working capital limits.
The Bills limit has to include limits for purchase of third party (outstation) cheques / bank drafts.
Banks must satisfy themselves that the bills limit is not mis-utilised.

Overdrawal in OD loan accounts: A limit is set in the Overdraft accounts as per the assessed credit profile of the customers.  The limit can be breached in exceptional circumstances. Such breaches should be backed with proper approvals. In the instant case, there were frequent breaches of the Overdraft limits.

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