In a firm bid to uphold financial discipline, the Reserve Bank of India (RBI) has levied monetary penalties on four cooperative banks from southern India for breaching various provisions under the Banking Regulation Act, 1949, and for failing to comply with key RBI directives.
These banks are Hyderabad District Co-operative Central Bank, Karimnagar District Co-operative Central Bank, Chittoor Co-operative Town Bank and Karnataka Co-operative Bank.
These penalties, disclosed on June 23, 2025, are part of the central bank’s ongoing push for accountability and sound governance in the cooperative banking sector.
The penalized institutions include the Hyderabad District Co-operative Central Bank Ltd. and the Karimnagar District Co-operative Central Bank Ltd. from Telangana, each fined Rs 1 lakh.
The fines were imposed for violations of Section 20 read with Section 56 of the Banking Regulation Act, which deal with restrictions on granting loans and advances to directors and associated entities, a key area vulnerable to conflict of interest.
The Chittoor Co-operative Town Bank Ltd. from Andhra Pradesh was fined Rs 1 lakh for failing to comply with RBI instructions concerning Urban Cooperative Banks (UCBs), specifically regarding exposure norms and Know Your Customer (KYC) guidelines.
The Karnataka Co-operative Bank Ltd., located in Muddebihal, Karnataka, faced an identical penalty for comparable non-compliance, charged under Section 47A(1)(c) along with Sections 46(4)(i) and 56 of the Act.
RBI clarified that these penalties are based on regulatory lapses and are not intended to question the legitimacy of the banks’ business dealings with customers. Nevertheless, the move signals the regulator’s sharpened focus on governance and systemic integrity.
The RBI has consistently stressed the importance of financial prudence and governance, especially in cooperative institutions that serve vulnerable and rural populations.
With a history of some cooperative banks facing liquidity crises and fraud, such as the infamous PMC Bank collapse in 2019, these latest penalties serve as a proactive deterrent to prevent such systemic failures and restore depositor confidence.
