RBI Imposes Rs5.50 Lakh Penalty on 5 Cooperative Banks

Moneylife Digital Team 26 August 2025

Investor Interest

Reserve Bank of India (RBI) has imposed a penalty of Rs5.50 lakh on five cooperative banks for non-compliance with the directions issued by the banking regulator. The highest penalty of Rs2 lakh has been imposed on Anand Mercantile Cooperative Bank Ltd from Gujarat.

Other banks penalised by the RBI include: Karnataka-based Bellary District Cooperative Central (DCC) Bank Ltd, Yadgir DCC Bank Ltd, Bharat Cooperative Bank Ltd and Tamil Nadu-based Dharmapuri DCC Bank Ltd.

Anand Mercantile Cooperative Bank has been penalised for non-compliance with certain directions issued by RBI on guidelines for managing risk in the outsourcing of financial services by cooperative banks and know-your-customer (KYC).

RBI statutory inspection found that Anand Mercantile Cooperative Bank had outsourced its core management function of internal audit and failed to conduct periodic reviews of risk categorisation for certain accounts, which should be done at least once every six months.

Bellary DCC Bank has been fined Rs1.50 lakh for contravention of provisions of Sections 19 and 20 of the Banking Regulation Act, 1949 (BR Act). The lender had sanctioned a loan to one of its directors and held shares in another cooperative society in contravention of the BR Act.

Tamil Nadu-based Dharmapuri DCC Bank has been penalised Rs1 lakh for contravention of provisions of Section 20 of the BR Act. The lender had sanctioned loans to its directors.

RBI also inspected Kalaburagi and Yadgir DCC Bank and found that it failed to upload customers' KYC records to the Central KYC Records Registry (CKYCR) within the prescribed timeline.

As a result, RBI imposed a penalty of Rs50,000 on Kalaburagi and Yadgir DCC Bank.

Bharat Cooperative Bank has been penalised Rs50,000 for non-compliance with specific directions issued by the RBI under the supervisory action framework (SAF). The lender was found to have sanctioned or renewed credit facilities to sectors with high levels of non-performing asset (NPAs) or defaults, sanctioned and disbursed fresh loans and advances without collateral security in the form of term deposits and offered deposit interest rates higher than those offered by the State Bank of India (SBI).

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

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

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