RBI Imposes ₹2.50 Lakh Penalty on 2 Cooperative Banks from Tamil Nadu

Moneylife Digital Team 02 December 2025

Investor Interest

Reserve Bank of India (RBI) has imposed a penalty of ₹2.50 lakh on two cooperative banks from Tamil Nadu for non-compliance with the directions issued by the banking regulator. The highest penalty of ₹2 lakh has been imposed on Arni Cooperative Town Bank Ltd. Kallidaikurichi Cooperative Urban Bank Ltd has been fined ₹50,000.

Arni Cooperative Town Bank has been penalised for failing to comply with several directives from RBI. These include prudential norms related to capital adequacy for primary urban cooperative banks (UCBs), exposure norms, statutory and other restrictions for UCBs and guidelines on gold loans with bullet repayment for primary UCBs.

RBI’s statutory inspection found that Arni Cooperative Town Bank had refunded share capital to its members even though its capital-to-risk (weighted) assets ratio (CRAR) was below the regulatory minimum. It had also sanctioned certain loans without following the norm of linking shares to borrowings, again despite its inadequate CRAR. Furthermore, the lender granted loans exceeding the prescribed regulatory limits to certain designated members and sanctioned gold loans under the bullet repayment scheme in excess of the permitted limit.

Similarly, during its inspection of Kallidaikurichi Cooperative Urban Bank, RBI found that the lender had allowed refunds of share capital to its members, despite its CRAR being less than the regulatory minimum.

As a result, RBI penalised Kallidaikurichi Cooperative Urban Bank.

"After considering the reply and oral submissions of both the banks during the personal hearing, RBI concluded that the charges of non-compliance with directions were substantiated and warranted imposition of monetary penalty," the central bank says.

In both cases, RBI says, the penalties are based on deficiencies in regulatory compliance and are not intended to be pronounced on the validity of any transaction or agreement they entered into with their customer.

Comments