A recent press report said that the Reserve Bank of India has imposed a monetary penalty of Rs.5.00 lakh (Rupees five lakh only) on Nagar Urban Co-operative Bank Ltd., Ahmednagar, Maharashtra, in exercise of powers vested in it under the provisions of Section 47A(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (AACS) for violation of directives/guidelines of the Reserve Bank of India on loans/advances to directors, by purchasing cheques beyond ` 0.50 lakh pertaining to relatives of a director.
The Reserve Bank of India had issued a show cause notice to the bank in response to which the bank submitted a written reply. After considering the facts of the case and submissions made in the personal hearing, the Reserve Bank of India came to the conclusion that the violations were substantiated and warranted imposition of the penalty.
The RBI is the central banking institution of India and it controls the monetary policy of the rupee. The regulator has recently hiked key interest rates by 25 basis points, which is its 12th such hike since March, 2010. The hike has made retails loans such as personal loan, home loans, car loans etc. more expensive.