RBI Imposes Penalty On Bharat Co-operative Bank For Deposit Rate Non-Compliance

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹15 lakh on Bharat Co-operative Bank (Mumbai) Limited for violating regulatory norms linked to interest payments on deposits. The action follows an order issued on February 6, 2026, under statutory powers granted by the Banking Regulation Act, 1949.

The penalty arises from supervisory findings after an inspection of the bank’s financial position as on March 31, 2025. RBI concluded that the bank had failed to comply with directions relating to ‘Interest Rate on Deposits’, specifically by not paying interest on certain eligible prematurely withdrawn term deposits.

RBI’s Regulatory Action and Legal Basis

RBI’s penalty on Bharat Co-operative Bank was issued under Section 47A(1)(c), read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949. The order dated February 6, 2026, reflects RBI’s enforcement power to ensure adherence to prescribed norms.

Under these provisions, RBI can act against regulated entities if they fail to comply with official directions. In this case, the non-compliance pertained to rules governing interest rates on deposits.

Inspection Findings and Compliance Assessment

The statutory inspection conducted with reference to the bank’s financials as on March 31, 2025, identified deviations from RBI’s directives on deposit interest payments. Such inspections form part of the RBI’s routine supervisory framework to gauge compliance levels across regulated institutions.

Findings indicated that the bank had not followed mandated norms in specific cases involving premature withdrawal of term deposits. These observations resulted in correspondence between RBI and the bank, culminating in the issuance of a show‑cause notice.

Confirmed Violation: Non-Payment Of Interest

RBI confirmed that Bharat Co-operative Bank did not pay interest on certain eligible term deposits that were withdrawn prematurely. Term deposits typically carry stipulated interest payment rules, including provisions for premature closure.

RBI’s directions require banks to honour applicable interest payments in accordance with established norms when deposits are closed early. The confirmed violation demonstrated a lapse in adhering to these requirements.

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Conclusion

RBI’s imposition of a ₹15 lakh penalty on Bharat Co-operative Bank underscores ongoing efforts to enforce compliance in the banking sector. The violation involved non-payment of interest on certain prematurely withdrawn term deposits, which breached RBI’s directives on deposit interest norms.

The action follows a structured process involving inspection, correspondence and hearings, demonstrating RBI’s procedural approach to enforcement. While the penalty addresses compliance failures, it does not affect customer agreements and leaves room for further regulatory measures if necessary.

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