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RBI Imposes Penalties on Four Co-operative Banks for Violating Banking Regulation Act.

Banking & Finance | Dated: 30 Jun 2025

On June 27, 2025, the Reserve Bank of India (RBI) penalized four co-operative banks located in Telangana, Andhra Pradesh, and Karnataka for breaching multiple provisions of the Banking Regulation Act, 1949. The action highlights RBI's increasing focus on regulatory compliance and governance within the co-operative banking sector.

🎯 Key Highlights:

  • - The RBI, exercising powers under the Banking Regulation (BR) Act, 1949, has imposed monetary penalties on four urban cooperative banks (UCBs) for non-compliance with specific regulatory directions. These penalties are aimed at ensuring that co-operative banks align with RBI’s supervisory expectations regarding transparency, lending practices, and customer verification norms.
  • - The penalized banks include Hyderabad District Cooperative Central Bank (HDCCB) and Karimnagar District Cooperative Central Bank (KDCCB) in Telangana, Chittoor Cooperative Town Bank (CCTB) in Andhra Pradesh, and Karnataka Co-operative Bank (KCB) based in Bengaluru, Karnataka. Each of these banks was found to be in violation of one or more regulatory provisions relating to risk governance and KYC adherence.
  • - Both HDCCB and KDCCB were fined ₹1 lakh each for contravening Section 20 read with Section 56 of the Banking Regulation Act, 1949. These sections pertain to restrictions on granting loans and advances to related parties, and ensure responsible credit allocation within cooperative institutions.

💡 Other Important Facts:

  • (i) CCTB (Chittoor Co-operative Town Bank) was also fined ₹1 lakh for non-compliance with RBI’s instructions specifically applicable to Urban Co-operative Banks (UCBs). The violations were related to failure in adhering to prudential exposure norms and Know Your Customer (KYC) obligations mandated by the RBI to prevent money laundering and fraud.
  • (ii) KCB (Karnataka Co-operative Bank) faced a penalty of ₹1 lakh as well, for breaching multiple provisions under Section 47A(1)(c), 46(4)(i), and 56 of the BR Act. These provisions involve non-compliance with RBI guidelines regarding operational transparency, governance mechanisms, and documentation standards required in cooperative banking operations.
  • (iii) This regulatory action by RBI underscores its commitment to strengthening the supervisory framework of the co-operative banking system, which plays a key role in rural and semi-urban credit delivery. These penalties serve as a warning to other UCBs to enhance due diligence, adopt robust internal controls, and maintain full regulatory compliance.

📚 Test Your Knowledge:

Which cooperative bank from Andhra Pradesh was recently penalized ₹1 lakh by RBI for violating KYC and exposure norms?

Correct Answer: Chittoor Co-operative Town Bank

🚀 Quick Recap: