RBI Slaps ₹1 Lakh Fine on Chikmagalur Co-operative Bank for Violating Banking Regulations
Monetary Penalty Imposed as RBI Cites Compliance Failures at District Co-operative Central Bank
The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹1 lakh on The Chikmagalur District Co-operative Central Bank Ltd., Karnataka. This action stems from the bank's contravention of specific provisions within the Banking Regulation Act, 1949 (BR Act).The penalty was formalized by an order issued by the RBI on June 25, 2026. The imposed fine represents a violation of Section 20 read with Section 56 of the BR Act. This measure was taken in exercise of powers granted to the RBI under various sections of the BR Act.
Basis of Statutory Inspection and Violation Finding
The investigation into the bank's affairs, as on March 31, 2025, involved a statutory inspection conducted by National Bank for Agriculture and Rural Development (NABARD). This supervisory review uncovered deficiencies in the bank's regulatory compliance.Based on these findings, RBI issued a notice to the institution. The notice required the bank to provide justification as to why a penalty should not be levied against it. Following consideration of the bank's response and submissions during a personal hearing, the RBI determined that charges were sustained.
Director-Related Loans Cited as Compliance Lapse
A primary charge found against The Chikmagalur District Co-operative Central Bank Ltd. was the sanctioning of director related loans. This action constitutes a lapse in statutory compliance for the bank.The RBI maintained that this monetary penalty is solely based on deficiencies in statutory compliance. It is crucial to note that the imposition of this fine does not determine the validity of any transaction or agreement made by the bank with its customers.
Implications and Scope of Regulatory Action
The RBI issued clarity regarding the nature of this penal action against the co-operative bank. The penalty relates specifically to regulatory breaches identified during the inspection process.Furthermore, the imposition of this monetary fine is explicitly stated to be without prejudice to any other corrective actions that the RBI may initiate against the bank in the future. This underscores the oversight role played by the regulator.
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