Zoroastrian Co-operative Bank, Bombay, has been fined Rs. 1.25 crore by the Reserve Bank of India (RBI) for failing to follow their instructions about “Discounting of Bills by UCBs — Restricted Letters of Credit” and the Co-operative Banks Rules, 1985.
The central bank declared in a statement issued on Monday night that this fine had been imposed in the course of exercising powers granted to it. The RBI said in the statement that this action is based on a lack of regulatory compliance and is not meant to question the legality of any transaction or arrangement made by the bank with its clients.
According to the RBI statement, the bank’s statutory inspection was conducted by the RBI based on its financial situation as of March 31, 2020, and an external auditor’s review of the risk assessment report for the Forensic Audit Report (FAR).
As the bank discounted lodging bills under LCs without establishing the veracity of the underlying transactions and documents and failed to preserve records in good order for an eight-year period, the RBI claimed that all related correspondence in the matter showed the bank had violated the central bank’s directions on the discounting of bills by UCBs and restricted letters of credit (LC) and the Rules.