4 Cooperative Banks from South India Penalised Rs1 Lakh Each by RBI
Moneylife Digital Team 27 June 2025
Reserve Bank of India (RBI) has imposed a penalty of Rs1 lakh each on four cooperative banks from south India for non-compliance with the directions issued by the banking regulator.
 
The banks penalised by RBI are Telangana-based Karimnagar District Cooperative Central Bank Ltd and Hyderabad District Cooperative Central Bank Ltd, Andhra Pradesh-based Chittoor Cooperative Town Bank Ltd and Karnataka Cooperative Bank Ltd.
 
Hyderabad District Cooperative Central Bank and Karimnagar District Cooperative Central Bank were penalised for violating Section 20 of the Banking Regulation Act (BR Act), which prohibits banks from sanctioning loans to their directors. An inspection conducted by the National Bank for Agriculture and Rural Development (NABARD) revealed that both lenders had extended such loans, breaching regulatory norms.
 
Chittoor Cooperative Town Bank and Karnataka Cooperative Bank faced penalties for non-compliance with RBI’s directions related to exposure norms, statutory restrictions applicable to urban cooperative banks (UCBs) and know-your-customer (KYC) guidelines. These lenders exceeded prudential inter-bank and counterparty exposure limits and failed to upload customer KYC records to the Central KYC Registry (CKYCR) within the mandated timeframe.
 
RBI, however, clarifies that its action against these four banks is based on deficiencies in regulatory compliance and not intended to pronounce on the validity of any transaction or agreement entered into by the banks with their customers.
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