Page 16 - Banking Finance July 2025
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revival strategy aimed at restoring fi-
nancial stability. The plan includes loan
restructuring, strict audit measures,
digital integration, and enhanced gov-
ernance standards across the affected
banks.
State officials have acknowledged the
Ò»© scale of the crisis and are working
alongside Kerala Bank to implement
reforms that will ensure better over-
sight and accountability. Training for
cooperative bank staff and improved
risk management systems are also part
of the long-term strategy.
RBI Penalizes Four South Indian Co-op Banks for The revival plan is seen as critical to
safeguarding depositor interests, pre-
Regulatory Breaches serving rural credit access, and rebuild-
The Reserve Bank of India (RBI) has imposed monetary penalties on four ing public trust in Keralas once-robust
cooperative banks in South India for violating various regulatory norms. The cooperative network.
penalised institutions include The Ottapalam Co-operative Urban Bank Ltd
(Kerala), The Krishna Bhima Samruddhi Local Area Bank Ltd (Telangana), Vigilance Books Two
The Yemmiganur Co-operative Town Bank Ltd (Andhra Pradesh), and The
Karnataka Rajya Souharda Federal Co-operative Ltd (Karnataka). Former Kerala Co-op Bank
Employees for Corruption
The breaches range from non-compliance with Know Your Customer (KYC)
guidelines, loan exposure limits, and failure to adhere to supervisory instruc- The Vigilance and Anti-Corruption Bu-
tions. The RBI clarified that the penalties are administrative in nature and reau (VACB) has booked two former
not intended to question the validity of any transactions or agreements made employees of a cooperative bank in
by the banks with their customers. Kerala on charges of financial misap-
propriation and abuse of official posi-
These enforcement actions form part of the central banks ongoing efforts tion. The case pertains to alleged ir-
to strengthen governance, compliance, and risk management across Indias
regularities committed during their
cooperative banking sector.
tenure at the Perinad Service Co-op-
The RBI reiterated its expectation for all banks, especially cooperative in- erative Bank in Kollam district.
stitutions, to ensure robust internal controls and adhere strictly to regula- According to the FIR, the accused
tory frameworks to safeguard depositor interests and maintain systemic manipulated loan disbursements and
stability. account records, causing financial loss
to the bank. The VACB investigation
863 Kerala Co-op Banks 7,042 crore, raising alarms about the revealed that the duo bypassed stan-
financial health of the state's coopera- dard procedures and colluded to siphon
Report Rs. 7,042 Cr Loss; tive banking sector. These losses stem off funds by forging documents and is-
Kerala Bank Proposes Re- from poor loan recovery, mounting suing loans without proper collateral
NPAs, and mismanagement, particu- verification.
vival Plan larly in primary agricultural and rural The FIR was registered following a pre-
In a concerning development, 863 co- cooperative banks. liminary inquiry triggered by com-
operative banks in Kerala have collec- In response, Kerala Bank, the umbrella plaints from internal auditors and local
tively reported losses amounting to Rs. apex institution, has stepped in with a members.
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