RBI Imposes Penalties on 2 Cooperative Banks Over Compliance Lapses

The Reserve Bank of India (RBI) has imposed monetary penalties on two cooperative banks for non-compliance with regulatory guidelines and statutory provisions under the Banking Regulation Act, 1949. The penalties relate to lapses in Know Your Customer (KYC) norms, exposure limits, unclaimed deposits, and loan monitoring practices.

Penalty on Jilla Sahakari Kendriya Bank

RBI imposed a monetary penalty of ₹1.50 lakh on Jilla Sahakari Kendriya Bank Maryadit, Seoni, Madhya Pradesh. The action was taken for contravention of Section 26A read with Section 56 of the Banking Regulation Act and non-compliance with KYC-related directions.

The deficiencies were identified during a statutory inspection conducted by NABARD with reference to the bank’s financial position as of March 31, 2025. According to RBI, the bank failed to transfer eligible unclaimed deposits to the Depositor Education and Awareness Fund within the prescribed timeline.

Additionally, the bank did not conduct periodic reviews of customer risk categorisation at least once every six months, as mandated under KYC guidelines.

RBI clarified that the penalty is based on regulatory deficiencies and does not question the validity of any customer transactions or agreements.

Shree Kadi Nagarik Sahakari Bank Faces ₹16.30 Lakh Penalty

In a separate action, RBI imposed a penalty of ₹16.30 lakh on Shree Kadi Nagarik Sahakari Bank Ltd., Mehsana, Gujarat. The penalty was linked to violations of RBI directions related to exposure norms and management of advances for Urban Cooperative Banks (UCBs).

The inspection, conducted with reference to the bank’s financial position as of March 31, 2025, revealed that the bank had breached prudential exposure limits for a group of connected borrowers or parties.

RBI also found that the bank failed to ensure proper end-use monitoring of funds for certain loans sanctioned by it. Such lapses can increase credit risk and weaken financial discipline within the banking system.

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Conclusion

The latest RBI penalties on cooperative banks underline the regulator’s continued focus on compliance and financial discipline. While the monetary penalties may appear limited in size, they serve as an important warning for banks to strengthen internal controls, improve monitoring systems, and follow regulatory guidelines more strictly to maintain depositor trust and operational stability.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a private recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.