RBI Imposes ₹5.50 Lakh Penalty on 3 Cooperative Banks from Karnataka
Moneylife Digital Team 25 August 2026
Reserve Bank of India (RBI) has imposed a total penalty of ₹5.50 lakh on three cooperative banks from Karnataka for non-compliance with its regulatory directions. Shri Vijay Mahantesh Cooperative Bank Ltd from Hungund, has been fined ₹2.50 lakh, while Pragathi Cooperative Bank Ltd has been penalised ₹2 lakh. Vikas Souharda Cooperative Bank Ltd from Hosapete, has been fined ₹1 lakh.
 
Shri Vijay Mahantesh Cooperative Bank has been penalised for non-compliance with directions issued by RBI relating to income recognition, asset classification, provisioning and other related matters –urban cooperative banks (UCBs) and loans and advances to directors, their relatives and firms or concerns in which they are interested.
 
RBI conducted a statutory inspection of Shri Vijay Mahantesh Cooperative Bank with reference to its financial position as on 31 March 2025. The inspection found that the lender had failed to classify certain loan accounts as non-performing assets (NPAs) and had sanctioned loans to directors, in violation of the applicable regulatory directions.
 
Pragathi Cooperative Bank has been penalised for contravening Section 20 of the Banking Regulation Act (BR Act) and for non-compliance with RBI directions relating to loans and advances to directors and their relatives, exposure norms and other statutory restrictions applicable to UCBs and the classification, valuation and operation of investment portfolios.
 
RBI found that Pragathi Cooperative Bank had sanctioned loans to directors, breached the prescribed single-borrower exposure limit and exceeded the prudential limits for gross inter-bank exposure and inter-bank counterparty exposure.
 
RBI also inspected Vikas Souharda Cooperative Bank and found out that the lender had failed to classify certain loan accounts as NPAs. As a result, RBI imposed a penalty of ₹1 lakh on Vikas Souharda Cooperative Bank.
 
The central bank says, "After considering the reply and oral submissions of all banks during the personal hearing, RBI concluded that the charges of non-compliance with RBI directions were substantiated and warranted imposition of a monetary penalty."
 
In all these 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 with their customers.
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