RBI Imposes Penalty on Vita Merchants’ Co-operative Bank

The Reserve Bank of India imposed a monetary penalty of ₹3.10 lakh on Vita Merchants’ Co-operative Bank Ltd. through an order dated February 13, 2026. The action followed findings from the regulator’s inspection of the bank’s financial position as on March 31, 2025.

RBI concluded that the bank had violated specific exposure norms applicable to urban co-operative banks and fair lending requirements. The penalty was levied under powers exercised through relevant sections of the Banking Regulation Act, 1949.

RBI’s Findings from Statutory Inspection

RBI’s inspection assessed the bank’s compliance with regulatory norms as part of its supervisory process. During the assessment, the regulator identified deviations from the prescribed exposure norms for UCBs, along with gaps in adherence to fair lending practices.

These findings were communicated to the bank through a notice requiring it to explain the reasons for non-compliance. Following a review of the bank’s written response and oral submissions, RBI determined that the violations warranted monetary penalty.

Nature Of Regulatory Violations

The regulator found that the bank had sanctioned loans to certain nominal members beyond the regulatory limits permitted for UCBs. It also noted that the bank had not communicated the levy of penal charges and the reasons for such charges to specific borrowers.

These lapses indicated gaps in internal compliance processes linked to exposure management and customer communication obligations. RBI considered these violations material enough to justify supervisory action.

Legal Basis for Imposition of Penalty

The monetary penalty was imposed under Section 47A(1)(c) of the Banking Regulation Act, 1949, read with Sections 46(4)(i) and 56. These provisions empower RBI to take action against co-operative banks for non-compliance with regulatory directions.

The order clarified that the action is specifically related to deficiencies in regulatory compliance. It does not question the validity of any contracts or transactions executed by the bank with its customers.

Supervisory Process and Follow-up Actions

RBI followed its standard supervisory procedure by issuing a show-cause notice before deciding on the penalty. The bank was given the opportunity to present written explanations and make oral submissions during a personal hearing.

After reviewing all submissions, the regulator concluded that the charges were sustained. RBI further stated that the penalty is without prejudice to any additional supervisory or enforcement actions that may be taken in the future.

Read More: Canara Robeco Opens NFO for Banking and Financial Services Equity Fund.

Conclusion

The penalty highlights RBI’s ongoing focus on ensuring compliance among urban co-operative banks with exposure norms and fair lending rules. The violations identified at Vita Merchants’ Co-operative Bank related to loan sanction limits and borrower communication.

The regulator clarified that the penalty addresses compliance shortcomings rather than contractual disputes. RBI may consider further action if additional lapses are identified during subsequent supervisory reviews.

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