RBI Imposes Monetary Penalty on Co-operative Bank After Compliance Lapse on Director Loans and Small Value Lending

RBI Imposes Monetary Penalty on Co-operative Bank After Compliance Lapse on Director Loans and Small Value Lending​

The Reserve Bank of India (RBI) has imposed a significant monetary penalty on Sri Bharathi Co-operative Urban Bank Limited, Hyderabad. The action follows findings related to regulatory non-compliance concerning specific lending practices within the bank.

Under an order dated June 25, 2026, RBI levied a penalty totaling ₹1.50 lakh (Rupees One Lakh Fifty Thousand only). This punitive measure targets failures in adherence to key directions issued by the central regulator.

Details of Regulatory Violations Against The Bank​

The imposition stems from deficiencies identified during the statutory inspection conducted by RBI concerning the bank's financial position as of March 31, 2025. Supervisory findings indicated multiple instances where the bank failed to comply with specific RBI guidelines.

Crucially, the charges against Sri Bharathi Co-operative Urban Bank Limited included two primary areas of non-compliance. First, the bank was found to have sanctioned director related loans. Second, it failed to ensure that small value loans comprised at least 40% of its aggregate loans and advances as on March 31, 2025.

RBI’s Enforcement Action and Legal Basis​

The penalty action is taken under the powers granted to RBI by Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949. A notice was initially issued to the bank, requiring it to show cause as to why a penalty should not be imposed.

After reviewing the bank’s reply, oral submissions during the personal hearing, and additional submissions, RBI sustained the charges. The regulatory action underscores the central bank's commitment to ensuring strict adherence to established banking practices by all institutions.

Implications of Monetary Penalty for Co-operative Banks​

The decision emphasizes that such punitive actions are based on regulatory compliance lapses alone. The penalty is not intended to pronounce upon the validity of any transaction or agreement previously entered into between the bank and its customers.

The RBI has maintained that this monetary penalty stands without prejudice to any other actions it may deem necessary to initiate against Sri Bharathi Co-operative Urban Bank Limited in the future. This signals continued rigorous oversight from the central regulator regarding institutional governance and lending mandates.