RBI Imposes Penalty of 13 Lakh on Four Cooperative Banks

The Reserve Bank of India (RBI) has imposed monetary fines worth Rs. 13 lakh on four urban cooperative banks in Maharashtra recently for various breaches of regulation. These fines, reported towards the end of April and beginning of May 2025, were given under Section 47A(1)(c) read together with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949. The actions follow regulatory inspections made by the RBI with reference to the then-existing financial positions of these banks as of March 31, 2024, which unveiled several cases of default in implementing RBI instructions.

The Deccan Merchants Co-operative Bank Ltd., Mumbai, was imposed a Rs. 2 lakh fine for extending loans to directors, contravening RBI directions on “Loans and advances to directors, their relatives, and firms/concerns in which they are interested.” On a supervisory inspection followed by a show-cause notice, the bank submitted its reply and made oral submissions in a personal hearing. Nevertheless, the RBI concluded that the contravention was established, calling for the fine.

A Stronger penalty of Rs.3 lakh was imposed on The Hindusthan Co-operative Bank Ltd., Mumbai for non-compliance with RBI directions on “Maintenance of Deposit Accounts—Primary (Urban) Co-operative Banks.” The particular breach included charging penal rates for non-maintenance of minimum balance in savings bank accounts without adequately intimating customers through SMS, e-mail, or letters. Even after the explanations of the bank and further submissions, the RBI held the charge to be established.

Siddheshwar Urban Co-operative Bank Maryadit, Sillod, Aurangabad, was imposed the lowest fine of Rs. 50,000 for violating prudential inter-bank (gross) exposure limits and violating RBI guidelines on “Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks.” The penalty was levied after taking into account the response of the bank to the show-cause notice and oral arguments placed during the personal hearing, the RBI ruling the infraction justified punitive measures.

The highest fine of Rs. 7.50 lakh was imposed on The Pusad Urban Cooperative Bank Limited, Pusad for repeated regulatory violations. The bank had regularized Non-Performing Accounts without repayment through authentic sources, opened savings deposit accounts for ineligible parties, and provided higher interest rates on deposits than the State Bank of India, contravening the Supervisory Action Framework. The RBI has clarified that these fines are founded on regulatory shortfall deficiencies and don’t pass judgment on the legitimacy of any of the transactions between the banks and their customers, yet keep the rights to pursue further action against the said institutions.