RBI Slams Co-operative Bank with Monetary Penalty After Failures in Asset Classification
The Reserve Bank of India (RBI) has imposed a significant monetary penalty on Shri Vijay Mahantesh Co-operative Bank Limited, Hungund, Karnataka. The action comes following supervisory findings related to regulatory non-compliance concerning asset classification and lending practices.The bank has been penalized with an amount totaling ₹ 2.50 lakh (Rupees Two lakh Fifty thousand only). This decision was finalized by the RBI through an official order dated August 20, 2026.
Monetary Penalty Imposed Over Regulatory Lapses
The penalty targets deficiencies in compliance with critical directions issued by the RBI. These guidelines cover areas such as 'Income Recognition, Asset Classification, Provisioning and Other Related Matters - UCBs'.The imposition of the penalty is carried out under the powers granted to the RBI. These powers are derived from section 47A(1)(c) read with sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
Non-Compliance Includes Misclassification of Loans and Director Lending
The regulatory action was based on a statutory inspection conducted by RBI referencing the bank’s financial status as of March 31, 2025. The supervisory findings revealed multiple areas of concern regarding the bank's operations.Specifically, the charges sustained against the bank included failure to classify certain loan accounts correctly as non-performing assets (NPAs). Additionally, the review found that the institution had sanctioned director related loans, which is a key regulatory violation.
RBI Action Underscores Strictness on Banking Regulations
The regulator emphasized that this action stems purely from deficiencies in compliance with established directions. The penalty does not aim to pronounce upon the validity of any transaction or agreement entered into by the bank and its customers.The CBI’s decision serves as a strong reminder regarding regulatory oversight for all co-operative banks (UCBs). RBI also cautioned that the monetary penalty is without prejudice to any other action it may initiate against the institution in the future.
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