RBI Penalizes Pragathi Co-operative Bank for Regulatory Violations and Loan Irregularities
The Reserve Bank of India (RBI) has imposed a monetary penalty on The Pragathi Cooperative Bank Limited, Karnataka. The decision stems from serious breaches of statutory and regulatory compliance by the bank.The penalty was formalized through an order dated August 20, 2026. RBI levied a fine of ₹2 lakh (Rupees Two Lakh only) against the cooperative bank. This action falls under sections 20 read with section 56 of the Banking Regulation Act, 1949 (BR Act).
Key Violations Leading to Monetary Penalty
The penalty was imposed due to multiple non-compliances observed during a statutory inspection conducted by RBI. The inspection reviewed the bank's financial position as of March 31, 2025.The primary violations identified included sanctioning director related loans. Furthermore, the bank breached both critical regulatory limits defined by the central bank.
These breaches also encompassed violating prescribed prudential inter-bank (gross) exposure limit. The Pragathi Co-operative Bank Limited was found to be non-compliant with specific RBI directions regarding its operations.
Review of Statutory and Regulatory Compliance
RBI's actions were triggered following supervisory findings related to statutory provisions. These provisions relate specifically to loans and advances involving directors, their relatives, and associated firms or concerns.The investigation also covered the bank’s classification and valuation procedures for investment portfolios. Specifically, RBI reviewed non-compliance with directions concerning exposure norms in Urban Co-operative Banks (UCBs).
Based on the comprehensive findings and subsequent reply submitted by the bank, RBI determined that these charges were warranted a monetary penalty. The final decision was taken after considering the submissions during a personal hearing.
Scope of RBI's Enforcement Action
The imposition of this monetary penalty serves as regulatory censure for deficiencies in compliance. RBI clearly stated that this action is separate from and does not pronounce upon the validity of any existing transaction or agreement made by the bank with its customers.Regulators confirmed that the fine stands without prejudice to any other enforcement actions that may be initiated against The Pragathi Co-operative Bank Limited. This underscores the seriousness of maintaining adherence to banking regulations in all institutions.
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