RBI Imposes Rs3.50 Lakh Penalty on 2 Cooperative Banks for Regulatory Violations

Moneylife Digital Team 12 September 2025

Investor Interest

Reserve Bank of India (RBI) has imposed a penalty of Rs3.50 lakh on two cooperative banks for non-compliance with the directions issued by the banking regulator. The highest penalty of Rs3 lakh has been imposed on Ahmedabad-based Progressive Mercantile Cooperative Bank Ltd. Sikkim State Cooperative Bank Ltd has been penalised Rs50,000.

Progressive Mercantile Cooperative Bank has been penalised for failing to comply with directions issued by RBI. The violations relate to inspection and audit systems in primary urban cooperative banks (UCBs), know-your-customer (KYC) norms and customer protection guidelines on limiting the liability of customers in unauthorised electronic banking transactions.

RBI’s statutory inspection found several lapses at Progressive Mercantile Cooperative Bank. The lender conducted concurrent audits only on a quarterly basis instead of carrying out simultaneous checks of transactions and also submitted audit reports with delays. It failed to conduct periodic reviews of risk categorisation for certain accounts at the required interval of at least once every six months.

Additionally, Progressive Mercantile Cooperative Bank did not provide its customers with the facility to instantly respond by ‘reply’ to SMS alerts to raise objections to unauthorised electronic banking transactions.

Sikkim State Cooperative Bank has been fined by RBI for non-compliance with KYC norms. The lender had failed to upload customer KYC records to the central KYC records registry (CKYCR) within the prescribed timeline.

"After considering the reply and oral submissions of both the banks during the personal hearing, RBI concluded that the charges of non-compliance with directions were substantiated and warranted imposition of monetary penalty," the central bank says.

In both cases, RBI says the penalties are based on deficiencies in regulatory compliance and are not intended to be pronounced on the validity of any transaction or agreement they entered into with their customer.

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