RBI Slaps Rs7.13 lakh Penalty on 4 Cooperative Banks, 1 HFC

Moneylife Digital Team 12 August 2025

Investor Interest

Reserve Bank of India (RBI) has imposed penalties of Rs7.13 lakh on four cooperative banks and a housing finance company (HFC) for non-compliance with the directions issued by the banking regulator. The highest penalty of Rs2.53 lakh has been imposed on Bhubaneswar-based Utkal Cooperative Bank Ltd.

The other entities penalised by RBI are: Nalgonda District Cooperative Central Bank Ltd from Telangana, Kasaragod Cooperative Town Bank Ltd from Kerala, District Central Cooperative Bank Ltd from Chhattisgarh and Altum Credo Home Finance Pvt Ltd, an HFC based in Maharashtra.

Utkal Cooperative Bank has been penalised for non-compliance with specific directions issued by RBI under the supervisory action framework (SAF) and certain directions issued on membership of credit information companies (CICs) by cooperative banks and know-your-customer (KYC).

RBI’s statutory inspection found several violations by Utkal Cooperative Bank. These included incurring capital expenditure without prior RBI approval, in violation of directions under SAF, failing to submit customer credit information to three CICs, not uploading customer's KYC records to the Central KYC Records Registry (CKYCR) and not implementing a system for periodic review of account risk categorisation which should be carried out at least once every six months.

Nalgonda District Cooperative Central Bank has been fined Rs2.50 lakh for contravention of provisions of Section 20 of the Banking Regulation Act, 1949 (BR Act). The lender had sanctioned loans to its directors

Kasaragod Cooperative Town Bank has been penalised Rs1 lakh for non-compliance with certain RBI directions, including those on limits for exposure to single and group borrowers or parties and large exposures, the revised targets for priority sector lending for UCBs and the comprehensive as well as basic cyber security framework for primary urban cooperative banks (UCBs).

RBI found out that Kasaragod Cooperative Town Bank had sanctioned loans and advances to certain connected borrowers beyond the applicable group exposure limit and not implemented certain cybersecurity control measures and requirements under the cybersecurity framework prescribed by RBI.

Further, District Central Cooperative Bank was also penalised Rs1 lakh for contravention of provisions of Section 26A of the (BR Act). The lender had failed to transfer eligible unclaimed amounts to the depositor education and awareness fund (DEA Fund) within the prescribed time.

RBI conducted a statutory inspection of Altum Credo Home Finance, an HFC based in Maharashtra and found that the company had failed to implement a system for periodically reviewing the risk categorisation of accounts, which should be done at least once every six months. As a result, RBI imposed a penalty of Rs10,000 on the company.

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

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