RBI Imposes Rs2.95 Lakh Penalty on 4 Cooperative Banks

Moneylife Digital Team 29 August 2025

Investor Interest

Reserve Bank of India (RBI) has imposed a total penalty of Rs2.95 lakh on four cooperative banks for non-compliance with its regulatory directions.

Vijayapura District Central Cooperative Bank Ltd from Karnataka and Purasawalkam Cooperative Bank Ltd from Tamil Nadu were each fined Rs1 lakh. Ponani Cooperative Urban Bank Ltd, based in Kerala, was penalised Rs50,000, while Nanded District Central Cooperative Bank Ltd, from Maharashtra, faced a penalty of Rs45,000.

Vijayapura District Central Cooperative Bank was fined for violating Section 20 of the Banking Regulation Act, 1949 (BR Act). During its inspection, RBI found that the Bank had sanctioned a loan to one of its directors, which is prohibited.

Purasawalkam Cooperative Bank was penalised for failing to comply with prudential norms on capital adequacy for primary urban cooperative banks (UCBs) and directions under the supervisory action framework (SAF). The lender had allowed the refund of share capital to members despite its capital-to-risk-weighted assets ratio (CRAR) being below the prescribed minimum. It also failed to reduce its single borrower exposure limit for fresh loans and advances by 50% of the regulatory ceiling, as required under SAF.

Ponani Cooperative Urban Bank came under scrutiny after RBI found that it had opened savings deposit accounts in the name of ineligible entities. As a result, RBI imposed a penalty of Rs50,000 on Ponani Cooperative Urban Bank.

Nanded District Central Cooperative Bank was penalised for lapses in know-your-customer (KYC) compliance and failing to follow rules on membership of credit information companies (CICs). An inspection conducted by the National Bank for Agriculture and Rural Development (NABARD) revealed that the lender had not installed adequate software systems to generate alerts for suspicious transactions. It had also failed to submit borrower credit information to all four CICs, as mandated.

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 four 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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