RBI Imposes Penalty on Matoshri Mahila Sahakari Bank for KYC Non‑Compliance

The Reserve Bank of India has imposed a monetary penalty of ₹40,000 on Matoshri Mahila Sahakari Bank Limited in Parner, Maharashtra. The order was issued on February 13, 2026, after the bank failed to comply with specific KYC requirements.

The action followed RBI’s review of the bank’s adherence to regulatory norms tied to customer risk monitoring. RBI confirmed that the penalty was imposed under the provisions available to it under the Banking Regulation Act, 1949.

RBI’s Regulatory Action and Legal Basis

RBI stated that the penalty was imposed under Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949. These provisions permit the central bank to act when regulated entities fail to meet prescribed compliance standards.

The order reflects RBI’s authority to enforce KYC norms, especially when supervisory findings indicate lapses. This process ensures that banks remain accountable for maintaining proper systems and controls.

Background Of Inspection and Show‑Cause Proceedings

RBI conducted a statutory inspection of the bank based on its financial position as on March 31, 2025. The inspection identified areas where the bank had not complied with RBI’s KYC guidelines.

Based on these findings, a show‑cause notice was issued asking the bank to explain why a penalty should not be imposed. The bank responded with written submissions and also made oral representations during a personal hearing with RBI officials.

Key Violation Identified By RBI

RBI concluded that the bank had failed to establish a system for periodic review of customer risk categorisation. The rules require banks to review risk categorisation at least once every six months, which the bank did not implement.

RBI determined that this failure constituted a significant compliance gap. The regulator considered this lapse serious enough to warrant the imposition of a monetary penalty.

Nature And Scope of RBI’s Enforcement

RBI clarified that the action is based solely on deficiencies in regulatory compliance. The order does not question the legality or validity of any customer transactions or agreements.

The penalty serves as a corrective measure to reinforce the bank’s obligation to follow KYC requirements. RBI added that the penalty does not preclude further action should additional issues arise.

Read More: RBI Issues Draft Directions to Improve Reporting of INR Derivative Transactions.

Conclusion

The penalty highlights RBI’s ongoing emphasis on enforcing strong KYC standards across cooperative banks. The inspection findings show that risk review systems remain a critical part of regulatory compliance.

Failure to meet these requirements can lead to financial penalties and supervisory intervention. RBI’s enforcement aims to ensure that banks maintain effective monitoring frameworks to safeguard the integrity of customer accounts.

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