RBI Imposes ₹7.10 lakh Penalty on 5 Cooperative Banks

Moneylife Digital Team 27 February 2026

Investor Interest

Reserve Bank of India (RBI) has imposed a penalty of ₹7.10 lakh on five cooperative banks for non-compliance with the directions issued by the banking regulator. The highest penalty of ₹3.10 lakh has been imposed on Vita Merchant's Cooperative Bank Ltd from Maharashtra.

Other banks penalised by RBI are Belagavi District Central Cooperative Bank Ltd from Karnataka, Mahbubnagar District Cooperative Central Bank Ltd from Telangana, Guntur Women Cooperative Urban Bank Ltd from Andhra Pradesh and Prakasapuram Cooperative Urban Bank Ltd from Tamil Nadu.

Vita Merchant’s Cooperative Bank has been penalised for non-compliance with certain RBI directions on exposure norms and statutory or other restrictions applicable to urban cooperative banks (UCBs), as well as for violations of fair lending practices, including the improper levy of penal charges on loan accounts.

The statutory inspection of Vita Merchant's Cooperative Bank revealed that the lender had sanctioned loans to certain nominal members in excess of the prescribed regulatory limits and had failed to communicate the levy of penal charges, along with the reasons for such charges, to certain borrowers.

Belagavi District Central Cooperative Bank has been fined ₹2 lakh for contravening the provisions of Section 20 read with Section 56 of the Banking Regulation Act (BR Act) 1949 and for non-compliance with RBI directions on gold loan – bullet repayment and exposure to commercial real estate.

RBI’s statutory inspection of Belagavi District Central Cooperative Bank, which was conducted by the National Bank for Agriculture and Rural Development (NABARD), revealed several regulatory lapses. The lender had sanctioned loans to directors and their related parties, granted gold loans under the bullet repayment scheme beyond the prescribed regulatory limits and sanctioned a loan to a non-residential commercial real estate project.

RBI also inspected the Mahbubnagar District Cooperative Central Bank and found out that it had sanctioned a director-related loan.

As a result, RBI imposed a penalty of ₹1 lakh on the lender.

Tamil Nadu–based Prakasapuram Cooperative Urban Bank has been penalised ₹50,000 for non-compliance with certain directions issued by RBI on the declaration of dividends by UCBs. The lender had paid dividends out of accumulated profits from previous years, in violation of the prescribed norms.

Further, Guntur Women Cooperative Urban Bank has also been penalised ₹50,000 for non-compliance with certain directions issued by the RBI relating to know-your-customer (KYC) norms. The lender had failed to upload customers’ KYC records to the central KYC records registry (CKYCR).

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

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