The Reserve Bank of India (RBI) has been actively enforcing regulatory compliance among co-operative banks through monetary penalties and operational directives. Recently, it imposed fines on multiple urban co-operative banks for violating key banking norms, including exposure limits, loan management, and Know Your Customer (KYC) guidelines.
For instance, Sri Basaveshwar Sahakar Bank in Karnataka was fined Rs 2 lakh for breaching RBI’s directives on exposure norms and charitable donations, while A.P. Raja Rajeswari Mahila Co-operative Urban Bank in Hyderabad was penalized Rs 50,000 for exceeding regulatory limits on gold loans.
These penalties were imposed following statutory inspections that revealed non-compliance. The RBI followed due process by issuing show-cause notices, considering responses, and conducting hearings before finalizing the fines. While these actions highlight lapses in regulatory adherence, they do not question the validity of customer transactions with these banks.
Additionally, RBI has extended restrictions on the operations of several co-operative banks under Section 35A of the Banking Regulation Act, 1949. Banks such as Karwar Urban Co-operative Bank, Pune Sahakari Bank, and National Mercantile Co-operative Bank have been placed under directives restricting their activities due to financial instability concerns.
These directives have been periodically extended, emphasizing RBI’s cautious oversight of their financial health.
By imposing penalties and extending operational restrictions, the RBI aims to ensure the stability of the co-operative banking sector and protect depositors’ interests while maintaining regulatory discipline.
