RBI Imposes Rs11.48 Lakh Penalty on 3 Cooperative Banks and 2 HFCs

Moneylife Digital Team 04 June 2025

Investor Interest

Reserve Bank of India (RBI) has imposed penalties of Rs11.48 lakh on three cooperative banks and two housing finance companies (HFCs) for non-compliance with the directions issued by the banking regulator. The highest penalty of Rs6 lakh has been imposed on Nodia-based Citizen Cooperative Bank Ltd.

Other entities penalised by RBI include: Punjab-based Bathinda Central Cooperative Bank Ltd, Srinagar-based Jammu and Kashmir State Cooperative Bank Ltd and Maharashtra-based two HFCs, India Home Loan Ltd and Khush Housing Finance Pvt Ltd.

Citizen Cooperative Bank has been penalised for contravention of the provisions of Section 12B of the Banking Regulation Act, 1949 (BR Act) and non-compliance with certain directions issued by RBI on know-your-customer (KYC).

RBI's statutory inspection found that Citizen Cooperative Bank had committed two key lapses. First, it failed to ensure that individuals, along with their relatives, obtained prior approval from the RBI before being issued or allotted shares beyond the permissible limit. Second, the lender did not implement a robust software system capable of generating alerts to identify suspicious transactions.

Bathinda Central Cooperative Bank was fined Rs3 lakh for contravention of provisions of Section 26 of the BR Act. The lender had failed to transfer eligible unclaimed amounts to the depositor education and awareness fund (DEA Fund) within the prescribed time.

RBI conducted a statutory inspection of Jammu and Kashmir State Cooperative Bank and found that the lender failed to obtain officially valid documents (OVD) of its customers while establishing the account-based relationship. As a result, RBI imposed a penalty of Rs2 lakh on the Bank.

Mumbai-based India Home Loan was fined Rs32,000 for failing to comply with RBI directions related to KYC norms. The HFC did not carry out the required periodic review of risk categorisation of customer accounts, which is mandated to be done at least once every six months. Additionally, India Home Loan failed to regularly update the KYC details of its customers as required.

Another Mumbai-based HFC, Khush Housing Finance, was also fined Rs16,000 for non-compliance with RBI's KYC guidelines. The company failed to carry out the mandatory risk categorisation of its customers, as required under the applicable regulations.

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

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