The penalty has been imposed by Reserve Bank of India, for violation of operational instructions issued under Section 36(1) of B.R. Act, 1949 (AACS) to The Gandhidham Mercantile Co-operative Bank Ltd.
Reserve Bank of India has the following Broad Powers under Section 36 of Banking Regulation Act 1949 (AACS):
• RBI may caution / prohibit banks in general or particular from entering into any particular transaction or class of transactions or give advice to any bank
• Powers to RBI for re-organsing and expansion of cooperatives
• Assistance to any banking company in form of a loan or advance
• Require an officer of the banking company to discuss any such matter with an officer of the Reserve Bank
•Depute one or more of its officers to watch the proceedings at any meeting of the Board of Directors