The banking regulator, Reserve Bank of India, has ordered Abhyudaya Co-operative Bank to pay an amount of Rs. 5 lakh as penalty for not following its instructions and violating banking guidelines.
An investigation carried out in the bank's Vashi branch revealed that the bank failed to comply with the RBI guidelines on KYC/AML process. Penalizing the urban co-operative bank, RBI said, "The bank had also violated instructions by freezing the account and thus tipping off the customer. It had also closed the audit trail by closing the account."
The regulator observed that on a previous occasion also the bank did not comply with the set guidelines while carrying out a RTGS transaction with another bank, the Union Bank of India's Zaveri bazaar branch.
As a result of repeated non-compliance with banking guidelines of RBI, the central bank issued a show cause notice to the co-operative bank. Abhyudaya Co-operative Bank replied to the notice in writing. After taking into consideration, its reply and the repeated offences, RBI imposed a penalty on the bank.