RBI Hits Cooperative Bank with ₹1.5 Lakh Penalty for Sanctioning Director Loans and Failing KYC Compliance
Regulatory Action Against Chitradurga District Co-operative Central Bank
The Reserve Bank of India (RBI) has levied a monetary penalty of ₹1.50 lakh against The Chitradurga District Co-operative Central Bank Ltd., Chitradurga, Karnataka. This action was formalized by an RBI order dated June 15, 2026. The bank faced the imposition of this fine due to contravention of provisions under the Banking Regulation Act, 1949 (BR Act).The penalty specifically addresses non-compliance with certain directions issued by the RBI concerning Know Your Customer (KYC) protocols. This action was taken while exercising powers conferred upon the RBI under various sections of the BR Act.
Key Violations Sustained by the Bank
A statutory inspection conducted by National Bank for Agriculture and Rural Development (NABARD), covering the bank’s financial position as of March 31, 2025, led to supervisory findings. Following a review process that included considering the bank's response and oral submissions, RBI found specific charges against the institution warranting a monetary penalty.The two primary deficiencies sustained by the bank were centered on internal governance and regulatory technology usage. The bank was found to have sanctioned director related loans. Furthermore, it failed to upload customer KYC records onto the Central KYC Records Registry (CKYCR) within the stipulated timeline.
Legal Basis for Monetary Penalty
The penalty imposes a charge based on deficiencies in statutory and regulatory compliance. RBI determined that these failures constituted non-compliance with applicable provisions under the Banking Regulation Act of 1949. This regulatory action is conducted without prejudice to any other measures that might be initiated by the RBI against the concerned bank.It must be noted that the imposition of this monetary penalty is solely based on compliance deficiencies. The RBI statement clarified that the fine is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.
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