RBI Penalises 2 Co-operative Banks Over Compliance Failures

The Reserve Bank of India has imposed monetary penalties on two co-operative banks for failing to adhere to key regulatory guidelines. The actions stem from supervisory findings during inspections conducted with reference to their financial positions as of March 31, 2025.

Penalty on Pandharpur Urban Co-operative Bank

A penalty of ₹2 lakh has been levied on Pandharpur Urban Co-operative Bank Ltd. for violating RBI norms related to asset classification and the treatment of non-performing assets (NPAs). The central bank found that the lender had sanctioned additional credit facilities to certain borrowers to enable repayment of their existing non-performing loans.

Such practices are considered a breach of prudential norms, as they can mask the true asset quality of the bank and delay recognition of stressed accounts.

Penalty on Mogaveera Co-operative Bank

In a separate action, RBI imposed a penalty of ₹20,000 on Mogaveera Co-operative Bank Ltd. for non-compliance with prudential norms on capital adequacy. The bank was found to have refunded share capital multiple times despite its Capital to Risk-weighted Assets Ratio (CRAR) falling below the regulatory minimum.

Maintaining adequate capital buffers is critical for financial stability, and deviations from these norms can weaken a bank’s resilience to risks.

Regulatory Process and Findings

In both cases, RBI followed due process by issuing show-cause notices and reviewing the banks’ responses, including oral submissions made during personal hearings. After evaluating all materials, the central bank concluded that the violations were substantiated and warranted monetary penalties under the Banking Regulation Act, 1949.

RBI clarified that these penalties are based solely on regulatory deficiencies and do not question the validity of any transactions between the banks and their customers.

Also Read: RBI, IRDAI Unwilling to Open Banks and Insurers to Invest in Commodity Derivatives: SEBI Chief!

Conclusion

The penalties reinforce RBI’s ongoing commitment to ensuring strict compliance with banking regulations, especially among urban co-operative banks. By taking such actions, the regulator aims to promote transparency, strengthen financial discipline, and safeguard the stability of the banking system.

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