RBI Slaps Rs17.20 Lakh Penalty on 5 Cooperative Banks and Muthoot FinCorp
Moneylife Digital Team 29 September 2025
Reserve Bank of India (RBI) has imposed penalties of Rs17.20 lakh on five cooperative Banks and Muthoot FinCorp Ltd a non-banking financial company (NBFC) for non-compliance with the directions issued by the banking regulator. The highest penalty of Rs10 lakh has been imposed on Gayatri Cooperative Urban Bank Ltd from Telangana.
 
The other entities penalised by RBI include: Makarpura Industrial Estate Cooperative Bank Ltd from Gujarat, South Canara District Central Cooperative Bank Ltd from Karnataka, Guntur District Cooperative Central Bank Ltd from Andhra Pradesh and Tamil Nadu Circle Postal Cooperative Bank Ltd.
 
Gayatri Cooperative Urban Bank has been penalised for non-compliance with certain directions issued by RBI on marketing, distribution of mutual fund and insurance products by Urban Cooperative Banks (UCBs).
 
RBI's statutory inspection revealed that Gayatri Cooperative Urban Bank had sold insurance products to its customers without adequate disclosure and transparency.
 
Muthoot FinCorp has been fined Rs2.70 lakh for failing to comply with  RBI directions on appointing an internal ombudsman. The NBFC did not put in place a system for automatically escalating complaints those that were partly or fully rejected by its internal grievance redressal mechanism to its internal ombudsman, as required under RBI guidelines.
 
RBI during a statutory inspection of Makarpura Industrial Estate Cooperative Bank, found that the lender had failed to conduct the mandatory six-monthly review of risk categorisation for certain accounts and had also not implemented key cyber security control measures required under RBI’s cyber security framework.
 
As a result, RBI imposed a penalty of Rs2 lakh on Makarpura Industrial Estate Cooperative Bank.
 
South Canara District Central Cooperative Bank has been fined Rs1.50 lakh for failing to comply with certain directions issued by RBI related to housing finance, including guidelines on enhancement of individual housing loan limits and lending to commercial real estate for residential housing (CRE-RH). The lender was also found to have violated provisions of Section 19 of the BR Act.
 
RBI's statutory inspection which was conducted by National Bank for Agriculture and Rural Development (NABARD) revealed that South Canara District Central Cooperative Bank had breached the prudential exposure limits on housing finance and held shares in other cooperative society in contravention of BR Act.
 
Further , Guntur District Cooperative Central Bank has been penalised Rs50,000 for non-compliance with certain directions issued by RBI on know your customer (KYC).The lender had failed to upload the KYC records of customers onto central KYC records registry (CKYCR) within the prescribed timeline.
 
Tamil Nadu Circle Postal Cooperative Bank has been fined Rs50,000 for non-compliance with specific directions issued by RBI under supervisory action framework (SAF).The lender had offered interest rates on deposits higher than those offered by State Bank of India in non-adherence to directions issued under SAF.
 
In all 6 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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