RBI Imposes Penalty on Rajapur Urban Co-operative Bank for Compliance Lapse

The Reserve Bank of India (RBI) imposed a monetary penalty on Rajapur Urban Co-operative Bank Ltd. on January 23, 2026, for violating specific regulatory directions. The action followed a statutory inspection conducted with reference to the bank’s financial position as on March 31, 2025.

RBI determined that the bank had not complied with rules concerning loans and advances to directors, their relatives, and related entities. After reviewing the bank’s responses to the notice issued, RBI concluded that the violation warranted a monetary penalty.

RBI Cites Breach of Lending Norms

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. The central bank noted that it had sanctioned a loan to the relative of one of its directors, constituting a breach of prescribed lending restrictions.

This regulatory action followed supervisory findings that highlighted non-compliance with specific RBI directions. The penalty amount was set at ₹50,000, reflecting the seriousness of the compliance lapse.

Statutory Inspection and Findings

The statutory inspection of Rajapur Urban Co-operative Bank was conducted with reference to its financial position as on March 31, 2025. Supervisory observations indicated deviations from the norms governing director-linked lending.

Based on these findings, RBI issued a show-cause notice asking the bank to explain its position regarding the breach. After reviewing the written reply and additional submissions from the bank, RBI determined that the charge of sanctioning a loan to a director’s relative stood established.

Regulatory Framework and Enforcement Powers

RBI exercised its enforcement powers derived from the Banking Regulation Act to impose the penalty. These provisions enable the central bank to act against regulated entities for lapses involving governance, compliance, or oversight.

The directions on lending to directors and related parties are designed to prevent conflicts of interest in banking operations. In this case, the violation was assessed strictly from a regulatory-compliance perspective.

Clarification On Scope of Action

RBI clarified that the penalty does not impact the validity of transactions or agreements between the bank and its customers. It further noted that the action does not restrict the central bank from taking additional measures, should they be warranted.

The regulatory clarification outlined that the penalty addresses only the identified compliance gap. RBI also reiterated that such supervisory actions form part of its broader mandate to uphold transparency, governance, and risk discipline within the banking sector.

Read More: RBI Postpones Mandatory Climate Risk Reporting for Banks.

Conclusion

RBI’s decision to impose a penalty on Rajapur Urban Co-operative Bank highlights the central bank’s continued focus on compliance with governance-related directives. The sanction underscores the importance of adhering to restrictions on director-linked lending.

The findings of the March 31, 2025, inspection served as the basis for supervisory scrutiny and subsequent action.

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