The Reserve Bank of India has imposed monetary penalties on three district central co-operative banks and two urban co-operative banks for various regulatory lapses, including the sanctioning of loans to directors.
The action follows supervisory assessments and inspections conducted by RBI and the National Bank for Agriculture and Rural Development with reference to the financial position of these banks as on March 31, 2025.
The Loknete R.D. Appa Kshirsagar Sahakari Bank Ltd. in Maharashtra was fined Rs 30,000 for granting loans to its own directors and failing to furnish required information during inspection.
Similarly, the Kodagu District Co-operative Central Bank Limited was penalised Rs 1 lakh for sanctioning director-related loans, in violation of statutory provisions under the Banking Regulation Act.
Apart from governance lapses, RBI also identified multiple deficiencies in Know Your Customer (KYC) compliance. The Pali District Central Co-operative Bank Ltd. was fined Rs 50,000 for failing to carry out periodic reviews of customer risk categorisation.
The Mysore and Chamarajnagar District Co-operative Central Bank Limited faced a penalty of Rs 1 lakh for not uploading customer KYC records to the Central KYC Records Registry within the prescribed timelines and for holding shares in a co-operative society in contravention of norms.
The Tanur Co-operative Urban Bank Limited was also penalised Rs 50,000 for failing to upload KYC data to the registry.
The RBI emphasised that these penalties are based on deficiencies in regulatory and statutory compliance and are not intended to question the validity of transactions undertaken by customers. The central bank further stated that the actions are without prejudice to any additional measures that may be initiated against these banks.
This series of penalties sends a strong signal on the need for improved governance standards in co-operative banks, particularly in areas such as transparency, adherence to KYC norms, and avoiding conflict-of-interest practices such as lending to directors.
